The Piotroski F-Score measures how financially healthy a company is by counting how many of 9 basic checks it passes. Each pass is worth 1 point, so the score runs from 0 to 9, and every check asks the same simple question: is this company profitable, and getting healthier than it was last year?
The 9 checks fall into three groups.
Profitability (4 points): 1. Net income is positive 2. Cash from operations is positive 3. Return on assets is higher than last year 4. Cash from operations is greater than net income, meaning the profit is backed by real cash, not accounting
Borrowing and ability to pay bills (3 points): 5. Leverage fell: long-term debt as a share of total assets is lower than last year 6. Current ratio is higher than last year 7. No new shares were issued, so existing owners were not diluted
Operating efficiency (2 points): 8. Gross margin is higher than last year 9. Asset turnover is higher than last year, meaning each dollar of assets generated more sales
How to read it: 8 to 9 is strong, 5 to 7 is mixed, and 0 to 2 is weak. Joseph Piotroski, the accounting professor who built the score, showed that low scorers tend to perform much worse, especially among cheap-looking stocks, which makes the F-Score a useful filter for avoiding value traps: stocks that look like bargains but are cheap for a reason.