Why the Mission Marketing share price (LON:TMMG) could have further to run

Honing in on the measures that tell us what’s really going on can save us a lot of time and pain. At Stockopedia, we read through academic studies and backtest strategies to identify these key measures. One of the most promising we have found so far is Piotroski’s F-Score - and the F-Score has good news for shareholders of small cap Mission Marketing (LON:TMMG), which operates in the Consumer Cyclicals sector.

When you couple an attractive F-Score with a solid dividend yield (Mission Marketing is forecast to pay out 2.83%), it is an encouraging combination of income and quality - even when a share price has performed as strongly as Mission Marketing over the past year.

Why we should pay attention to the Piotroski F-Score

Followers of celebrated accounting professor Joseph Piotroski are well aware of the checklist that made him famous at the turn of the millennium. Piotroski is behind the F-Score: a simple indicator to highlight stocks showing the most likely prospects for outperformance amongst a basket of neglected companies.

The great thing about the F-Score is that it is essentially an entire quality and fundamental momentum screen in a single number, succinctly summing up the financial health trend of a company. Applying it as a filter on top of almost any strategy can help to increase returns and reduce risk.

The F-Score is made up of nine checks split up into three main areas of financial analysis. First is profitability, where it examines operating profits and cash flow to make sure the business can sustain itself and pay dividends. Then come three checks on the capital structure of a business, followed by a final look at the firm’s operating efficiency.

Mission Marketing (LON:TMMG)'s F-Score: what does it mean?

Stockopedia applies algorithms to its stream of financial data to automatically calculate the Piotroski F-Score for every stock on the market. It shows that Mission Marketing (LON:TMMG) scores 9 out of a possible 9. 

In his landmark academic paper "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers", Piotroksi showed that by investing in companies scoring 8 or 9 by these measures over a 20-year test period through to 1996, investor returns could be increased by an astounding 7.5% each year.

What does this mean for potential investors?

Mission has an F-Score that suggests it could be a promising investment candidate worthy of further research - but it's only a first step. Higher F-Score stocks can still have weaknesses and may trade at premium prices compared to other stocks. We've identified some areas of concern with Mission that you can find out about here.