Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Economics, Finance, & Analytics
  • Investments, Trading, and Financial Markets

Piotroski Score - Explained

What is a Piotroski Score?

Written by Jason Gordon

Updated at April 17th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is a Piotroski Score?How is a Piotroski Score Used?Criteria for ProfitabilityCriteria for Liquidity, Leverage, and Source of FundsCriteria for Operating Efficiency

What is a Piotroski Score?

The Piotroski score refers to a discrete score between 0-9 reflecting nine criteria that are used to determine the strength of a financial position firm. The use of the Piotroski score is to determine the best value stocks, with zero being the worst and nine the best.

Back to:INVESTMENTS & TRADING

How is a Piotroski Score Used?

The term Piostroski score got the name from Chicago Accounting Professor Joseph Piotroski, who came up with the scale, as per the specific company financial statements aspects. Aspects have much to do with the recent periods results of the company accounting. One point is given for every criterion met. However, when there is none met, then there is no awarding of points. These points are then put together to determine the best stocks. The Piotroski score is usually broken down into profitability; leverage, liquidity, source of funds; and operating efficiency categories, as highlighted below: 

Criteria for Profitability

  • Positive Net Income - one point
  • Operating cash flow that is positive in the current year - one point
  • Operations cash flow that is more than the net income - one point
  • Return on assets that is positive in the current year - one point

Criteria for Liquidity, Leverage, and Source of Funds

  • Long term debts lower ratio in the current period, compared to the past year (one point)
  • Lack of dilution (No new shares were issued in the past year) (one point)
  • Higher current ratio the current year compared to the last year (one point)

Criteria for Operating Efficiency

  • A higher asset turnover ratio than that in the previous year gets one point
  • A higher gross margin than that of last year gets one point as well

When a company's score happens to hit 8 or 9, then it is considered to be a good value. On the other hand, when the score point is between 0-2, it means that that the stock is considered weak. However, according to any investment system, the past results are not an indication that in the future, things will be work is a similar manner.

piotroski score

Was this article helpful?

Yes
No

Related Articles

  • Equity Indexed Annuity - Explained
  • Minsky Moment - Explained
  • Order Protection Rule - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand