Piotroski F-Score

The Piotroski F-Score, developed by Joseph Piotroski in 2000, is a 0–9 integer composite measuring fundamental strength across nine binary tests. The tests cover three dimensions: profitability (positive net income, positive ROA, positive operating cash flow, OCF greater than net income), leverage and liquidity (declining long-term debt, rising current ratio, no equity issuance), and operating efficiency (rising gross margin, rising asset turnover). Each passing test scores one point. The framework is mechanical and easily reproducible, which is its strength: it converts qualitative judgments about fundamental quality into a transparent score with auditable inputs. Piotroski's original research showed that high-F-score stocks within a value cohort dramatically outperformed low-F-score peers, and the result has held up reasonably well in subsequent out-of-sample testing. We use the F-Score as a fundamental-quality screen, particularly for value-leaning ideas where the question 'is this cheap because it deserves to be?' is paramount. We treat 8–9 as strong, 5–7 as average, 0–4 as weak — and weak F-score stocks rarely make it past the quality gate regardless of headline cheapness.