Two measures that show Frontier Developments' positive momentum

Finding stocks that have both positive share price momentum and improving financial health trends is a great way of finding pockets of quality and momentum in the stock market. A simple and effective starting point in this search might be to set up a screen that identifies high Piotroski F-Score stocks with positive one-year relative strengths. If we set the screen to only show F-Scores of 7 out of 9 or higher and an RS 1y of 0% or higher, we get a host of promising candidates to investigate.

I want to see if Frontier Developments (LON:FDEV) qualifies for this screen, but first a brief explanation of the theory that backs this kind of screen up.

Frontier Developments's F-Score: identifying fundamental momentum

Perhaps the biggest appeal of the F-Score is that it captures a stock's fundamental momentum in a single number that it is easily comparable across companies.

The Score itself is a simple but effective checklist: nine rules that a company either passes or fails, making for a score of between zero and nine. These checks are grouped under three headings: profitability, leverage and liquidity, and operating efficiency. Six of them record year-on-year changes in various financial health measures, meaning that, compared to other measures, the F-Score tells us more about the direction in which a company’s financial state is moving.

Frontier Developments passes this test, with an F-Score of 8.

Frontier Developments's one-year relative strength: measuring technical momentum

Relative strength gives an instant measure of how a stock has performed in comparison with a benchmark. Anything above 0 means that a company's share price has outperformed the benchmark over a certain time frame.

Using Stockopedia's financial data, we see that Frontier Developments has a one-year relative strength of 3.55%. This means Frontier Developments also passes this screen's technical momentum check.

Frontier Developments displays some promising early signs of quality and momentum, but we can do more research into these factors. If you head over to the group's StockReport, you can use the Quality Rank and Momentum Rank to see how Frontier Developments compares against every other company in the market.

What does this mean for potential investors?

Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Frontier Developments that you can find out about here.