Scores are algorithm-generated research tools, not investment recommendations.
Piotroski F-Score
Nine binary signals of financial health covering profitability, leverage, and operating efficiency -- a simple but powerful system that separates winners from losers.
Score output: 0/9 to 9/9
What is the Piotroski Score?
The Piotroski F-Score on AlphaStocks is a financial health assessment based on nine binary signals, each scoring 0 (bad) or 1 (good), producing a total from 0 to 9. Developed by Stanford accounting professor Joseph Piotroski in a landmark 2000 paper, the F-Score uses only publicly available financial statement data to separate financially strong companies from weak ones. The nine signals cover three categories: profitability (positive net income, positive operating cash flow, improving ROA, cash flow exceeding net income), leverage and liquidity (declining debt, improving current ratio, no share dilution), and operating efficiency (improving gross margin, improving asset turnover). A score of 7-9 indicates strong financial health, 4-6 is mixed, and 0-3 signals weakness. AlphaStocks implements seven sector-specific variants and adds confidence gating when data is incomplete. The F-Score contributes 35% of the Quality axis at 40% composite weight, for an effective weight of 14%.
How does the Piotroski Score work?
The F-Score evaluates nine binary signals across three categories. Profitability (4 signals): Is net income positive? Is operating cash flow positive? Did ROA improve year-over-year? Does operating cash flow exceed net income? The fourth signal is particularly valuable -- when cash exceeds accounting profit, earnings quality is high because the company is not inflating income through accruals.
Leverage and Liquidity (3 signals): Did the long-term debt-to-assets ratio decrease? Did the current ratio improve? Were no new shares issued during the year? Signal 7 catches a common value trap: companies that look cheap on EPS but are quietly diluting shareholders by issuing new shares.
Operating Efficiency (2 signals): Did gross margin improve year-over-year? Did asset turnover improve? These measure whether the core business is getting better -- expanding margins suggest pricing power, while improving asset turnover means the company generates more revenue per dollar of assets.
AlphaStocks extends the original framework with seven sector-specific variants. Banks replace asset turnover with net interest margin trend and adjust debt signals for banking capital structure. REITs use FFO instead of net income. Insurers account for insurance float in liquidity calculations. Utilities adjust ROA expectations for capital-intensive models. Each signal is computed deterministically from SEC EDGAR filings. When a signal cannot be computed due to missing data, it is marked unavailable rather than assigned a zero, and the confidence indicator is adjusted accordingly.
What does Piotroski look for in a stock?
The F-Score consists of nine binary signals. Each scores 1 if the condition is met and 0 if it is not. Here is what each signal checks:
Positive Net Income (Signal 1)
Pass
Net income is positive in the most recent fiscal year. A profitable company is less likely to face financial distress.
Fail
Net income is negative. The company is losing money, which increases risk of financial distress.
Positive Operating Cash Flow (Signal 2)
Pass
Cash from operations is positive. Cash flow is harder to manipulate than accounting earnings.
Fail
Operating cash flow is negative. The company is burning cash despite what earnings might show.
Improving ROA (Signal 3)
Pass
Return on Assets improved year-over-year. The business is becoming more efficient.
Fail
ROA declined. Efficiency is deteriorating, possibly signaling competitive pressure.
Cash Flow Exceeds Net Income (Signal 4)
Pass
Operating cash flow exceeds net income. Earnings quality is high -- the company is not inflating income through aggressive accounting.
Fail
Net income exceeds cash flow. The company may be recognizing revenue aggressively or deferring expenses.
Declining Debt Ratio (Signal 5)
Pass
Long-term debt-to-assets ratio decreased year-over-year. The company is strengthening its balance sheet.
Fail
Debt ratio increased. The company is taking on more leverage.
Improving Liquidity (Signal 6)
Pass
Current ratio improved year-over-year. Better ability to meet short-term obligations.
Fail
Current ratio declined. Short-term financial flexibility is tightening.
No Share Dilution (Signal 7)
Pass
No new shares were issued during the year. Management is confident in internal funding.
Fail
New shares were issued, diluting existing owners. Each share is now worth less of the pie.
Improving Gross Margin (Signal 8)
Pass
Gross margin improved year-over-year. Suggests pricing power or improving cost structure.
Fail
Gross margin declined. May indicate competitive pressure or rising input costs.
Improving Asset Turnover (Signal 9)
Pass
Asset turnover improved year-over-year. The company generates more revenue per dollar of assets -- capital efficiency is improving.
Fail
Asset turnover declined. The company needs more capital to generate the same revenue.
How AlphaStocks uses Piotroski
The Piotroski F-Score contributes 35% of the Quality axis, which carries 40% of the composite score, giving it an effective weight of 14%. It provides a granular, current-year health check that complements the Buffett model's broader, multi-year moat assessment.
It is paired with the Buffett-Style Quality Assessment (65% of Quality). Together, they answer the Quality axis question: Is this a strong, durable business? A stock with a Piotroski score of 8/9 and a Buffett-Style rating of "Strong" will have an excellent Quality axis score. A stock with 8/9 on Piotroski but "Reject" on Buffett will have a more moderate score -- the financial health is there, but the competitive position may be weak.
The binary simplicity of the F-Score is a deliberate feature. Piotroski's research showed that adding complexity did not improve results. Every signal counts equally, and the system asks straightforward questions: Is the company making money? Is the money real? Is the balance sheet improving? Is efficiency getting better?
Piotroski effective weight = 35% × 40% = 14% of the composite scoreCurrent top stocks by Piotroski
The Piotroski F-Score model is evaluated for all 1,595 stocks in our coverage. You can filter the full rankings table to see which stocks currently score highest on this model and compare them across all five investment frameworks.
Frequently Asked Questions
What is the Piotroski F-Score and what does it measure?
The Piotroski F-Score is a financial health assessment using nine binary signals (each scoring 0 or 1) covering profitability, leverage/liquidity, and operating efficiency. Developed by Stanford professor Joseph Piotroski in 2000, it ranges from 0 to 9. A score of 7-9 indicates strong financial health; 4-6 is mixed; 0-3 signals weakness. It uses only publicly available financial statement data.
What are the 9 signals in the Piotroski F-Score?
The nine signals are: (1) positive net income, (2) positive operating cash flow, (3) improving ROA, (4) cash flow exceeding net income, (5) declining long-term debt ratio, (6) improving current ratio, (7) no share dilution, (8) improving gross margin, and (9) improving asset turnover. Each scores 1 if the condition is met, 0 if not.
How does AlphaStocks adapt the F-Score for different sectors?
AlphaStocks uses seven sector-specific variants. Banks replace asset turnover with net interest margin trend and adjust debt signals. REITs use FFO instead of net income. Insurers account for float in liquidity calculations. Utilities adjust ROA expectations for capital-intensive models. The sector variant is selected automatically based on the company's GICS classification.
Is the Piotroski F-Score good for evaluating growth stocks?
The F-Score has limitations with growth stocks because it penalizes share issuance, increasing debt, and temporary margin compression -- all common during aggressive expansion. This is why AlphaStocks uses it as one input among five models. Growth companies penalized by Piotroski may score well on Lynch-Style PEG analysis, leading to a balanced composite score.
What does it mean when cash flow exceeds net income (Signal 4)?
When operating cash flow exceeds net income, earnings quality is high. Accrual-based accounting gives management discretion over reported earnings -- a company might report $100M in net income but only generate $60M in cash. When cash exceeds accounting profit, the reported earnings are backed by real money, not aggressive revenue recognition or deferred expenses.
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Every stock evaluated by Piotroski F-Score and four other proven investment models. Updated with every SEC filing.
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Model names reference the published investment methodologies of their respective authors. AlphaStocks is not affiliated with, endorsed by, or sponsored by Joseph Piotroskior any related entities. Our implementation is an interpretation of publicly described principles and may differ from the original author's approach.
AlphaStocks provides investment research and analysis, not investment advice. Past performance does not guarantee future results. Always do your own due diligence before making investment decisions. Data sourced from SEC EDGAR and Alpaca Markets.