Piotroski F-Score Price to Book Value Screen
The Piotroski F-Score screen aims to identify deep bargain-bucket stocks that are in recovery. Josef Piotroski, a finance professor, recognized that, while it has long been shown that bargain stocks (having a low Price to Book Value) have strong collective returns, there is very wide individual variability.
“Embedded in that mix of companies, you have some that are just stellar. Their performance turns around [but] half of the firms languish; they continue to perform poorly and eventually de-list or enter bankruptcy.”
What he wondered was whether it was possible to weed out the poor performers and identify the winners in advance.
He therefore sought to develop a simple accounting-based scoring system for evaluating a stock’s financial strength. Piotroski's F-Score looks at value stocks, i.e. the bottom 20% of the market in terms of price to book value, and tests nine variables from a company’s financial statements. One point is awarded for each test that a stock passes. Piotroski regards any stocks that scored eight or nine points as being the strongest. more »