Why you need to look at Metal Tiger's Piotroski F-Score

Metal Tiger (LON:MTR) makes strategic investments in fellow AIM quoted resource exploration and development companies, and also engages in joint mining ventures. The Company has core deposits in Thailand, Spain and Botswana.

For the fiscal year ended 31 December 2018, Metal Tiger PLC revenues decreased from £5.4m to -£13.2m due to adverse moves in fair value of equity investments, meaning the group's net loss increased from £180k to £3.4m.

Unfortunately, applying the Piotroski F-Score to this micro cap doesn't do much to dispel concerns... We'll get into this later, but first a quick refresher on what the F-Score means.

The Piotroski F-Score: one indicator to rule them all?

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.

Why the F-Score does not like Metal Tiger

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 Metal Tiger gets a lowly F-Score of 2 out of a possible 9. Food for thought for anyone looking to hold onto their money. We can see which areas of the checklist Metal Tiger fails in the graphic below:

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