Hutchison China Meditech (LON:HCM) cover image
212 Reads (2 mins read)

We need to talk about Hutchison China Meditech's (LON:HCM) Piotroski F-Score

6th Mar by Jack Brumby

As investors, we want to invest in the best and avoid those heading for trouble, but it's hard to keep tabs on hundreds of companies. That's a lot of noise and we've all got lives to lead. Even though Stockopedia's StockReports provide a wealth of financial data, filtering out the most dangerous stocks can be hard to do and takes time.

But what if you could gauge financial health with a single number?

This is what the Piotroski F-Score sets out to do. Unfortunately, what the F-Score algorithm says for Healthcare operator Hutchison China Meditech (LON:HCM) is not good - especially considering group revenues decreased 19% to $102.2M and net loss totaled $32.7M for the six months ended 30 June 2018.


Why Hutchison China Meditech (LON:HCM) shareholders need to know the Piotroski F-Score

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. Its secret sauce is that, unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving. Keeping on top of these trends can help us stay ahead of the game.

When a stock gets beaten down it ends up in the bargain basement of the stock market. From here there are generally three outcomes. The stock either:

  • Stumbles along, zombie-like,
  • Tumbles into administration, or
  • Recovers emphatically

Stanford Finance Professor Joseph Piotroski wanted to sort the wheat from the chaff. 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 Hutchison China Meditech (LON:HCM) gets a lowly F-Score of 2 out of a possible 9.


Fortify your portfolio with simple, effective tools

The problem areas for Hutchison China Meditech identified here can be explored in more depth on Stockopedia's research platform. All the best investors have stringent due diligence processes that reduce the chances of them suffering big losses, so why not take a leaf out of their book?

Simple tools can help us better measure and understand the risks we take. That's why the Stockopedia team has been busy building new ways of understanding investment risks and company characteristics. In this webinar, we talk about two or our most popular innovations: StockRank Styles and RiskRatings. These indicators transform a ton of vital financial information into intuitive classifications, allowing you to get an instant feel for any company on any market - sign up for a free trial to see how your stocks stack up.

Share this article
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
Share Price
Change Today
Hutchison China Meditech ( )

Stockopedia is here to help individual investors beat the markets by being the very best in stock analysis, research & community. Take a 30 day free trial of our extensive multi-award winning service and find out why more than ten thousand global investors can't live without it.

© Stockopedia 2019, Thomson Reuters, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.