The Piotroski F-Score is a financial model developed by Joseph Piotroski in 2000 as a way to evaluate the financial health and performance of a company. The model uses nine financial ratios and accounting metrics to assign a score ranging from 0 to 9 to a company, with higher scores indicating better financial health.
The Piotroski F-Score evaluates a company's financial statements and assigns points for positive or negative trends in the following areas:
Each financial metric is given a point if it meets certain criteria, such as positive trends in earnings or asset turnover. The points are then added up to give a final score, which can range from 0 to 9.
A score of 0-2 indicates poor financial health, a score of 3-4 suggests that the company is average, and a score of 5-9 suggests that the company is financially healthy.
The Piotroski F-Score is used by investors and analysts as a tool for evaluating the financial health and performance of a company, and it can be a useful way to identify potential investment opportunities.
Company ABC has following financial data for a company:
Using these data, we can calculate the financial ratios used in the Piotroski F-Score:
Using these points, we can calculate the Piotroski F-Score for the company:
Piotroski F-Score = 1+1+1+0+1+1+1+1+1 Piotroski F-Score = 8
The Piotroski F-Score for this hypothetical company is 8, which suggests that the company is financially healthy and has strong financial performance.