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Here's how Phoenix Global Resources (LON:PGR) fails the Piotroski F-Score

13th Mar '19 by Jack Brumby

To be successful, we need to invest in the best companies and avoid those with weak financials, but there are thousands of listed businesses. That's a lot of noise and even professionals struggle to find the time to keep on top of it all.

Thankfully you can gauge financial health with a single number and compare that number across companies.

It's called the Piotroski F-Score. Unfortunately, what the F-Score algorithm says for Energy operator Phoenix Global Resources (LON:PGR) is not good. For the six months ended 30 June 2018, Phoenix Global Resources PLC revenues increased 60% to $92.9M but net loss also increased from $7M to $41.9M. Given these losses, it is even more important for Phoenix to have a strong balance sheet.


What the Piotroski F-Score does better than any other number

The Piotroski F-Score is a nine-strong checklist split up into three sections, each looking at a different part of a company's financial situation. Unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving. Understanding this direction of travel can help us stay ahead of the game.

Stanford Finance Professor Joseph Piotroski wanted a smarter way of identifying recovery plays. After settling on the F-Score, he produced some astonishing results.

Piotroski found that weak stocks with an F-Score of 2 or less are five times more likely to either go bankrupt or delist due to financial problems. Working our way through Piotroski's checklist, we can see that Phoenix Global Resources gets a lowly F-Score of 2 out of a possible 9. Food for thought for anyone looking to hold onto their money. You can see where Phoenix fails in the graphic below:


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