What is F-Score?
A 9-point scoring system that evaluates a company's financial strength based on profitability, leverage, and efficiency metrics.
Think of it like this
Like a report card with 9 pass/fail tests - the more you pass, the healthier the company.
Formula
F-Score = Sum of 9 binary (0 or 1) criteria- Profitability (4): ROA, CFO, ΔROA, Accruals
- Leverage (3): ΔLeverage, ΔLiquidity, Equity Issue
- Efficiency (2): ΔMargin, ΔTurnover
Why it matters
- Academic research shows high scores outperform
- Identifies financially strong value stocks
- Simple binary scoring is easy to understand
- Developed by Stanford professor Joseph Piotroski
What's a good value?
0-3
Weak
Poor financial health, avoid
4-5
Average
Mixed signals, proceed with caution
6-7
Good
Solid financial position
8-9
Excellent
Strong fundamentals, quality company
Real-world example
A score of 8 means the company passed 8 of 9 financial health tests.
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