The Piotroski Score
The 9 signals were chosen to measure profitability (signals 1, 2, 3 & 4), leverage/liquidity (signals 5, 6 & 7) and operating efficiency (signals 8 & 9).
Signals – score 1 if true
- Net Income is positive
- Operating cash flow is positive
- Return on assets is improving
- Operating cash flow exceeds net income
- Long term debt to assets ratio is improving
- Current ratio is improving
- Shares outstanding have not increased
- Gross margin is improving
- Sales to total assets ratio is improving
High scoring stocks of 8 or 9 points are great business to lead the recovery in stock prices.