The Piotroski F-score combines nine tests of profitability, financing and efficiency based on two consecutive annual reports. Each test passed earns one point, giving a score from 0 to 9.
PiotroskiFScore >= 7
How are the nine points of the F-score awarded?
Piotroski F-score = sum of the nine points, from 0 to 9
Critivest compares the latest fiscal year with the previous one. Return on assets and asset turnover refer to the total assets at the beginning of each year, leverage to the average total assets.
| Test | One point if … |
|---|---|
| Profitability | |
| 1. Return on assets | net income divided by total assets at the beginning of the year is greater than 0 |
| 2. Operating cash flow | the operating cash flow is greater than 0 |
| 3. Change in return on assets | the return on assets is higher than in the previous year |
| 4. Quality of earnings | the operating cash flow is greater than net income |
| Financing and liquidity | |
| 5. Leverage | long-term debt divided by average total assets is lower than in the previous year |
| 6. Liquidity | current assets divided by current liabilities are higher than in the previous year |
| 7. New shares | the company issued no new common shares in the fiscal year |
| Efficiency | |
| 8. Gross margin | gross profit divided by revenue is higher than in the previous year |
| 9. Asset turnover | revenue divided by total assets at the beginning of the year is higher than in the previous year |
Values that stay the same earn no point for an improvement.
Calculating the Piotroski F-score: an example with 7 points
The fictional Example Company, amounts in EUR million:
| Test | Fiscal year | Previous year | Point |
|---|---|---|---|
| 1. Return on assets | 600 / 10,000 = 6.0% | 1 | |
| 2. Operating cash flow | 800 | 1 | |
| 3. Change in return on assets | 6.0% | 450 / 9,000 = 5.0% | 1 |
| 4. Quality of earnings | 800 > 600 | 1 | |
| 5. Leverage | 1,900 / 10,500 = 18.1% | 2,000 / 9,500 = 21.1% | 1 |
| 6. Liquidity | 3,300 / 2,400 = 1.38 | 3,000 / 2,000 = 1.50 | 0 |
| 7. New shares | none | 1 | |
| 8. Gross margin | 4,400 / 10,500 = 41.9% | 4,000 / 10,000 = 40.0% | 1 |
| 9. Asset turnover | 10,500 / 10,000 = 1.05 | 10,000 / 9,000 = 1.11 | 0 |
| Piotroski F-score | 7 | ||
Total assets were 9,000 at the end of the year before last, 10,000 at the end of the previous year and 11,000 at the end of the fiscal year, which gives the average total assets of 10,500 and 9,500.
What are the limits of the Piotroski F-score?
Why can't the F-score be calculated for every company?
The Piotroski F-score requires specific values from annual reports covering matching periods and a known nonfinancial sector. If required values are missing or the reports are too old, the score is not available in Critivest. Critivest does not calculate it for banks, insurers and other financial companies because the model does not fit them. Missing data never counts as a failed test or as a score of zero. The methodology explains how Critivest handles missing values.
Further limits of the model
- Piotroski studied companies with a high book-to-market ratio. For other companies, the score has been tested less.
- Each test counts the same, whether a figure changed a little or a lot. Most tests measure changes, not levels.
- The score is based on annual reports and reflects developments only with a delay.
Using the Piotroski F-score as your own criterion
This condition is met if the Piotroski F-score is at least 7:
PiotroskiFScore >= 7You set the limit yourself; 7 is an example, not a recommendation.
Which annual reports does Critivest need?
- Three balance sheets: at the end of the fiscal year, of the previous year and of the year before. In addition, the income statements of both years and the cash flow statement of the fiscal year.
- The balance sheet dates must be 350 to 380 days apart. The latest fiscal year used must not end four or more quarters before the latest balance sheet.
Differences from the original model
Instead of the income before extraordinary items of Piotroski's paper, Critivest uses the reported net income, the only one the data contains. It measures leverage with long-term debt including leases. Critivest recognizes new shares by reported proceeds from issuing common shares; if those are missing, a higher number of common shares counts as an issue, including shares issued for acquisitions.
Periods and missing values: Methodology.
Formula reference in Critivest
Name in conditions: PiotroskiFScore
Financial strength from 0 to 9 based on annual reports; higher is stronger. Uses reported net income, noncurrent debt and, without reported share issuance, the change in ordinary shares. Requires complete history and a known nonfinancial sector.
Related formulas
- Altman Z-score: The Altman Z-score combines ratios from the balance sheet and income statement into one value for the risk of financial distress. Plus the Z″-score.
- Debt-to-equity ratio: The debt-to-equity ratio relates a company's liabilities to its equity. How Critivest calculates it from the latest balance sheet.
Sources
- Joseph D. Piotroski (2000): Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. Journal of Accounting Research 38, pp. 1–41
- Piotroski F-score, Wikipedia
Last updated: November 4, 2026