Piotroski Score
PIOTROSKI SCORE
What is a Piotroski Score ?
Piotroski Score is a number between 0 and 9 which is used to determine the strength of a firm's financial position.
The Piotroski score is used to determine the best value stocks, with 9 being the best and 0 being the worst.
The Piotroski score is a favorite metric used to judge value stocks.
The score is named after Stanford accounting professor Joseph Piotroski.
It is based on 3 most important criteria: Profitability, Leverage and operating efficiency.
Let's discuss all 9 points one by one:-
1. Positive Net Income (Score 1): If the company has a positive net income in the current year, it receives a score of 1; otherwise, it gets a score of 0.
2. Positive Operating Cash Flow (Score 1): Similar to the first point, if the company has positive operating cash flow in the current year, it receives a score of 1.
3. Return on Assets (ROA) Improvement (Score 1): If the ROA is higher in the current year compared to the previous year, the company receives a score of 1.
4. Cash Flow from Operations > Net Income (Score 1): If cash flow from operations is greater than net income, the company gets a score of 1.
5. Lower Long-term Debt to Assets (Score 1): If the ratio of long-term debt to total assets is lower in the current year compared to the previous year, the company receives a score of 1.
6. Higher Current Ratio (Score 1): If the current ratio (current assets divided by current liabilities) is higher in the current year compared to the previous year, the company gets a score of 1.
7. No New Share Issuance (Score 1): If the company did not issue new shares in the last year, it receives a score of 1.
8. Gross Margin Improvement (Score 1): If the gross margin is higher in the current year compared to the previous year, the company gets a score of 1.
9. Asset Turnover Improvement (Score 1): If the asset turnover ratio (sales divided by total assets) is higher in the current year compared to the previous year, the company receives a score of 1.
Notes:-
If a company has a score of eight or nine, it is considered a good value.
If a company has a score of between zero and two points, it is likely not a good value.
17 Indian Stocks with Piotroski Score 9 are:-
- Gabriel India
- C P C L
- Amara Raja Ener.
- Elecon Engg.Co
- Force Motors
- GE Shipping Co
- ISGEC Heavy
- JK Paper
- Jyothy Labs
- Kirl. Brothers
- KNR Construct
- Mah. Seamless
- Nava
- Neuland Labs.
- IFB Industries
- Prudent Corp.
- Bikaji Foods
Like other Fundamental tools, Piotroski Score also is not a holy grail. It can only assist you in selecting a good stock. But you can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
This idea is for Educational purpose and paper trading only. Please consult your financial advisor before investing or making any position. Facts or Data given above may be slightly incorrect. We are not SEBI registered.
What is a Piotroski Score ?
Piotroski Score is a number between 0 and 9 which is used to determine the strength of a firm's financial position.
The Piotroski score is used to determine the best value stocks, with 9 being the best and 0 being the worst.
The Piotroski score is a favorite metric used to judge value stocks.
The score is named after Stanford accounting professor Joseph Piotroski.
It is based on 3 most important criteria: Profitability, Leverage and operating efficiency.
Let's discuss all 9 points one by one:-
1. Positive Net Income (Score 1): If the company has a positive net income in the current year, it receives a score of 1; otherwise, it gets a score of 0.
2. Positive Operating Cash Flow (Score 1): Similar to the first point, if the company has positive operating cash flow in the current year, it receives a score of 1.
3. Return on Assets (ROA) Improvement (Score 1): If the ROA is higher in the current year compared to the previous year, the company receives a score of 1.
4. Cash Flow from Operations > Net Income (Score 1): If cash flow from operations is greater than net income, the company gets a score of 1.
5. Lower Long-term Debt to Assets (Score 1): If the ratio of long-term debt to total assets is lower in the current year compared to the previous year, the company receives a score of 1.
6. Higher Current Ratio (Score 1): If the current ratio (current assets divided by current liabilities) is higher in the current year compared to the previous year, the company gets a score of 1.
7. No New Share Issuance (Score 1): If the company did not issue new shares in the last year, it receives a score of 1.
8. Gross Margin Improvement (Score 1): If the gross margin is higher in the current year compared to the previous year, the company gets a score of 1.
9. Asset Turnover Improvement (Score 1): If the asset turnover ratio (sales divided by total assets) is higher in the current year compared to the previous year, the company receives a score of 1.
Notes:-
If a company has a score of eight or nine, it is considered a good value.
If a company has a score of between zero and two points, it is likely not a good value.
17 Indian Stocks with Piotroski Score 9 are:-
- Gabriel India
- C P C L
- Amara Raja Ener.
- Elecon Engg.Co
- Force Motors
- GE Shipping Co
- ISGEC Heavy
- JK Paper
- Jyothy Labs
- Kirl. Brothers
- KNR Construct
- Mah. Seamless
- Nava
- Neuland Labs.
- IFB Industries
- Prudent Corp.
- Bikaji Foods
Like other Fundamental tools, Piotroski Score also is not a holy grail. It can only assist you in selecting a good stock. But you can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
This idea is for Educational purpose and paper trading only. Please consult your financial advisor before investing or making any position. Facts or Data given above may be slightly incorrect. We are not SEBI registered.
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