The Piotroski-F-Score methodology serves as a supplement to the value investing strategy. Backtest analyzes of the available Finanzoo.de data using the Piotroski-F-Score showed an average improvement in annual performance of around 2% over a period of 20 years. The Piotroski Score avoids so-called “value traps”. Thus, it can be seen as a safeguard for the Finanzoo FScore.
The individual criteria of the Pitroski F-Score can be divided into the areas of profitability, liquidity and operational efficiency. The following key figures are taken into account:
1. Net income before special items> 0
2. Operating cash flow> 0
3. Return on Assets> previous year
4. Operating cash flow> Net income before special items
Debt, liquidity, financing:
5. Leverage <previous year
6. 3rd degree liquidity> previous year
7. Number of shares outstanding is not higher than in the previous year
8. Gross margin> previous year
9. Capital turnover> previous year
The Piotroski F-Score is then formed from the sum of these 9 individual ratings. Whereby 1 point is awarded for fulfilling a criterion. So it can have a value between 0 and 9. 8 or 9 points are considered very good (buy), 0 and 1 point as very bad (sell). Finanzoo adds or subtracts the results as follows:
0 => -50 FScore points
1 => -40 FScore points
2 => -30 FScore points
3 => -20 FScore points
4 => 0 FScore points
5 => +5 FScore points
6 => +10 FScore points
7 => +15 FScore points
8 => +20 FScore points
9 => +25 FScore points
Use of the Piotroski F-Score in connection with the Finanzoo F Score:
Finanzoo.de continues to calculate the FScore as before based on the following criteria:
- Price-free-cash-flow ratio
- Equity ratio
- Price / earnings ratio
- Price-to-book ratio
The maximum possible number of points is 100.
The number of points achieved by a company is then corrected by the Piotroski F score at the end of the calculation.
Example: IBM based on available data as of January 9, 2021.