Piotroski High Score US Stocks — 9-Factor Financial Strength and Profitability Filter

The Piotroski F-Score is a 9-point scoring system developed by Joseph Piotroski in 2000. It evaluates financial statements across three dimensions: profitability (ROA, OCF, ROA trend, accruals), leverage/liquidity (debt ratio change, current ratio change, dilution), and operating efficiency (gross margin change, asset turnover change). Scores of 8-9 indicate strong financial health and historically predicted outperformance.

The F-Score captures financial statement improvement trends that markets are slow to price. A company simultaneously improving profitability, reducing leverage, improving liquidity, and growing efficiency is sending multiple positive signals that each individually might be overlooked but collectively predict strong performance. Piotroski's research showed 23% annual return differential between high- and low-score stocks within value portfolios.

An F-Score of 9 means the company passes all 9 Piotroski criteria: all three profitability tests, all three leverage/liquidity tests, and all three efficiency tests. This is the maximum score and represents a company with exceptional and improving financial health across all dimensions of the balance sheet, income statement, and cash flow statement.

Piotroski designed the F-Score specifically for value stocks — those trading at low P/B ratios. His original research separated winners from losers among cheap stocks on book-value metrics. The F-Score is less predictive when applied to expensive growth stocks where investors are already paying for anticipated financial improvements.

A profitability screen measures current levels — is ROA positive today? The F-Score measures both levels AND trends — is ROA positive AND did it improve vs. last year? The trend component is critical. A company with improving ROA, improving margins, and improving cash flow simultaneously is doing something right operationally; a company with merely adequate current levels might be deteriorating.

Yes. The nine binary tests use data from the income statement, balance sheet, and cash flow statement. Each test scores 1 (pass) or 0 (fail). Sum the nine scores for the total F-Score. The three profitability tests involve ROA, OCF positivity, ROA year-over-year change, and accruals. The three leverage/liquidity tests involve debt ratio change, current ratio change, and shares outstanding change. The three efficiency tests involve gross margin change and asset turnover change.

No. This screen applies multiple simultaneous filters that capture the spirit and most important elements of Piotroski's framework using the financial data available in the StockSifting database. The original F-Score requires specific year-over-year changes in nine precise metrics. This screen approximates the combined effect using overlapping financial strength conditions.

The accrual test checks whether Operating Cash Flow exceeds Net Income (OCF > Net Income). When a company's earnings are backed by genuine cash generation, the OCF/Net Income ratio exceeds 1. When earnings are inflated by non-cash accruals (revenue recognized before cash received, expenses deferred), OCF falls below net income — a warning sign that earnings quality is low.

Annually, after each company's annual report is filed. Piotroski's original research used annual financial data. Reviewing on a quarterly basis using quarterly data introduces noise. The strategy works by identifying systematic annual financial statement improvements — checking too frequently creates false signals from seasonal patterns and one-time quarterly events.

Industrials, consumer staples, healthcare, and financial services tend to produce consistent high-scoring companies. Technology companies can qualify but their intangible-asset-heavy balance sheets make the asset-turnover metrics less straightforward to interpret. Capital-light businesses with growing earnings and declining debt show up frequently.