The Piotroski F-Score was developed by Stanford accounting professor Joseph Piotroski in 2000. It is a composite score from 0 to 9 that assess a company's financial health across three categories: profitability, leverage/liquidity, and operating efficiency. Each criterion is binary — one point if met, zero if not.
Profitability criteria include: positive return on assets (ROA), positive operating cash flow, year-over-year improvement in ROA, and cash flow from operations exceeding net income. Leverage criteria: declining long-term debt ratio, improving current ratio, and no new share issuance (which would signal dilution). Efficiency criteria: improving gross margin and improving asset turnover.
A score of 7–9 is considered 'High Quality' — strong financial health. 5–6 is 'Solid.' Below 5 is 'Weak' and may indicate financial distress or operational deterioration.
Important caveat on StressTest.pro: The Piotroski score is a proxy model applied to trailing-twelve-month financial statement data. It was designed for value stocks and may not be meaningful for mega-cap software companies with non-traditional capital structures (e.g. Microsoft, Google) where classic accounting ratios appear anomalous.