piotroski f score
What it checks
Score each company on 9 boring-but-important accounting checks (positive profit, improving margin, no new shares issued, less debt, etc.). Stocks that pass 7-9 of them are quality compounders; stocks that pass 0-2 are distressed. Long the strong, short the weak.
Mechanism
Piotroski (2000, JAR) showed that a 9-signal accounting score distinguishes winners from losers within the high-B/M (value) universe. Long F>=7 / avoid F<=2 added ~7.5% annualized over 1976-1996 inside the value tertile, and ~23% in the highest B/M decile. Modern replications through 2021 confirm the score still differentiates forward returns even without the value gate; works especially well in uncertainty regimes when low-quality distressed names are marked down faster.
Signal rule
Piotroski 9-criteria F-score from YoY deltas (profitability 4 + leverage/liquidity 3 + operating efficiency 2); long F>=7 with uptrend, short F<=2 with downtrend.
Data dependencies
fundamentals_quarterlyQuarterly fundamentals (income, balance, cash-flow) from FMP + SEC.
Expected edge
- Paper alpha
- ~7.5% ann. long-only in value tertile
- Paper window
- 1976-1996
~7.5% ann. long-only inside value tertile (1976-1996); 3-5% post-publication OOS
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
sloan accrualsAccountingEarnings persistence is much lower in firms with high accruals. Going long low-accrual and short high-accrual delivers ~10% annualized over 1962-1991 (Sloan 1996, Accounting Review). Richardson-Sloan-Soliman-Tuna (2005, JAE) refined the measure to a broader balance-sheet accrual definition. Status (2024 replication consensus): alive in small caps, faded in large caps post-2003.
cash operating profitabilityAccountingDistinct from QMJ's "profitability" leg: cash-based operating profit (operating income + depreciation − ΔAR − ΔInventory + ΔAP) / book equity is a stronger single-name predictor than Novy-Marx's gross profitability or GAAP operating profitability. The intuition: cash-OP backs out accruals that the market discounts (or that fade) — what's left is the cash component of operating profit, which earnings persistence work shows is most repeatable.
novy marx gross profitabilityAccounting(Revenue − COGS) / total_assets — gross profitability — predicts cross-sectional returns as strongly as book-to-market, and has been the mainstream "profitability" leg of the FF5 model since 2015. Distinct from QMJ which composites profitability+growth+safety; standalone GP is the high-beta version that explains more of the cross-section. Status: alive. Decay debate is whether the spread has narrowed (yes: 30-50%) but the sign is intact and replicable across vendors.
qmjQualityQuality-Momentum (Asness-Frazzini-Pedersen 2019 QMJ): combine quality (gross profit / assets, ROE) with momentum — long when both are in their respective top buckets relative to their own history. The canonical cross-sectional implementation would rank across the universe; we approximate with self-relative quintiles, with fundamentals available-date lagged 45d to respect filing latency.
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