A 9-point scoring system that tests a company's financial strength across profitability, leverage, and efficiency. Scores of 7-9 signal strong financial health, while 0-3 signal weakness. It helps separate genuine value stocks from value traps.
Formula
Description
Joseph Piotroski's financial strength scoring system, published in 2000. Each of 9 criteria earns one point across three categories: profitability (ROA, cash flow, ROA change, accruals), leverage/liquidity (debt change, current ratio change, shares outstanding), and efficiency (gross margin, asset turnover). Used to separate strong value stocks from value traps.
Interpretation
7-9: Strong financial health (buy signal). 4-6: Average. 0-3: Weak (potential value trap). Piotroski's research showed that high F-Score stocks within the value universe dramatically outperformed low F-Score stocks.
Related Quality Indicators
The percentage of revenue left after paying all operating expenses but before interest and taxes. This shows how efficiently the core business runs. Above 15% is generally strong. Consistently expanding margins signal improving business quality.
The percentage of every revenue dollar that becomes bottom-line profit after all expenses. Above 10% is strong for most industries. Persistently high net margins often indicate a company has a competitive moat protecting its business.
Profitability before the effects of debt, taxes, and depreciation. Useful for comparing companies across different tax jurisdictions and capital structures. Above 20% is generally strong. Often used in merger and acquisition analysis.
The percentage of revenue that converts to free cash flow. This is arguably the most honest profitability metric because free cash flow is difficult to manipulate. Above 10% is strong. Capital-light businesses like software companies tend to have the highest FCF margins.
Explore More
Learn
Investing Tools
- Stock ScreenerScreen 85,000+ stocks by 120 indicators
- VM Score LeaderboardTop stocks ranked daily by VMCI
- Guru StrategiesApply Buffett, Graham, Greenblatt strategies
- DCF CalculatorCalculate intrinsic value, free
- Global MarketsMacro overview across 73 exchanges
- Stock CompareSide-by-side company comparison
Browse Stocks
- Stock Analysis HubBrowse by sector, exchange, or country
- Technology StocksTop tech stocks by intrinsic value
- Healthcare StocksTop healthcare stocks by VMCI
- Financial StocksTop financial stocks by VMCI
- Energy StocksTop energy stocks by fundamentals
- Real Estate StocksTop REIT and property stocks
- NYSE StocksBest-valued stocks on NYSE
- NASDAQ StocksTop NASDAQ stocks by VM Score
- LSE StocksTop London Stock Exchange stocks
- US StocksBest US stocks by fundamentals
- UK StocksBest UK stocks by fundamentals
- Japan StocksTop Japanese stocks by value