The Piotroski F-Score explained
The value score on ShareSift asks whether a stock is cheap. The Piotroski F-Score asks a different and arguably more important question: is the business getting better or worse?
It was published in 2000 by Joseph Piotroski, an accounting professor, who found that among cheap stocks, those whose financial statements were improving went on to do markedly better than those whose statements were deteriorating. Cheapness alone was not enough; the direction of the underlying business mattered.
The F-Score is nine pass/fail checks, so it runs from 0 to 9. Each check compares the company's latest financial year with the year before. On ShareSift, 7 or more is shown as strong, 4 to 6 as mixed, and 3 or less as weak.
Where the figures come from
For US-listed companies, ShareSift reads the figures directly from the company's filings with the US Securities and Exchange Commission, through the SEC's public EDGAR database. For companies listed elsewhere — on the ASX, for example — it uses annual financial statements from Yahoo Finance. Each stock page shows which two financial years are being compared.
The nine checks
Profitability — four checks
1. Positive net income. Did the company make a profit in the latest year?
2. Positive operating cash flow. Did the core business bring in more cash than it spent? Profit is an accounting figure; operating cash flow is money that actually arrived.
3. Return on assets improving. Did the company earn more on each dollar of assets than a year ago? This catches a business becoming more productive with what it owns.
4. Operating cash flow above net income. A test of earnings quality. When reported profit runs well ahead of the cash a business produces, profit has often been flattered by accounting choices — revenue booked before it is collected, for example. Piotroski found this check particularly useful.
Leverage and liquidity — three checks
5. Long-term debt decreased. Does the company owe less long-term debt than a year earlier?
6. Current ratio improved. Current ratio is short-term assets divided by short-term liabilities. Improvement means the company is better placed to meet bills due within a year.
7. No new shares issued. Did the share count stay flat? A company that has to raise money by issuing shares may be short of funds, and existing shareholders are diluted. ShareSift allows a 1% tolerance, so routine employee share schemes do not cause a fail.
Operating efficiency — two checks
8. Gross margin improved. Is the company keeping more of each sale after the direct cost of producing it? Rising gross margin suggests pricing power or falling costs.
9. Asset turnover improved. Is the company generating more revenue for each dollar of assets?
A check with missing data fails
As with the value score, a check that cannot be calculated counts as a fail — not a pass, and not "skipped". If last year's long-term debt is not reported, the company cannot pass the debt check.
That keeps the score honest — it can only be earned on reported numbers — but it means some kinds of company score low because of how they report rather than how they perform.
Worked examples
Live figures from ShareSift at the time of writing.
BHP (BHP.AX): 7 out of 9 — strong
Comparing financial year 2026 with 2025, BHP passes seven checks: positive net income, positive operating cash flow, cash flow ahead of profit, an improved current ratio, no new shares, a higher gross margin and better asset turnover.
It fails two: return on assets did not improve, and long-term debt did not fall. That is a reasonable picture of a profitable miner whose margins and efficiency improved even as returns on its large asset base softened.
Apple (AAPL): 6 out of 9 — mixed
Comparing 2025 with 2024, Apple passes on profit, operating cash flow, cash ahead of profit, falling long-term debt, no new shares and an improved gross margin. It fails on return on assets, current ratio and asset turnover.
A "mixed" 6 here is a very different thing from a 6 at a struggling company. Apple's fails are small year-on-year slips in ratios that remain exceptionally strong. The F-Score measures direction, not level. An excellent business that stays excellent but slightly less so can score lower than a weak business that is recovering.
Commonwealth Bank (CBA.AX): 3 out of 9 — but read with care
CBA passes on net income, an improved return on assets, and no new shares. It fails the other six.
Several of those fails say more about bank accounting than about CBA. A bank's operating cash flow swings with movements in customer deposits and loans, so it can be negative in a perfectly healthy year — which fails both cash-flow checks. Gross margin and current ratio do not apply to banks in the usual way, so those checks fail on missing data.
The F-Score was designed for industrial companies. For banks, insurers and other financial companies, treat it as largely uninformative.
How to use the F-Score
- Use it as a filter on cheap stocks — the job Piotroski designed it for. A high value score with an F-Score of 7 or more is cheap and improving. A high value score with an F-Score of 3 or less is the classic value trap — cheap, and getting worse.
- Remember it looks back one year. It compares two annual reports and knows nothing about the year in progress.
- Read the individual checks. Two companies on 6 can be failing entirely different things; each stock page lists every check and its result.
- Discount it for financial companies, for the reasons above.
What it does not tell you
The F-Score is built entirely from two years of reported accounts. It does not assess competitive position, management, the industry's outlook or valuation, and it cannot see anything since the latest annual report. It is a quick, rules-based read of financial direction — useful precisely because it is simple and transparent, and limited for the same reason.
This information is general in nature and does not take into account your objectives, financial situation or needs. ShareSift is not a financial adviser and does not hold an Australian Financial Services Licence. Consider whether any information is appropriate for you and seek independent advice before making an investment decision.