Piotroski Score

The Piotroski Score is a financial ratio analysis tool used to assess a company's financial health and strength. It was developed by Professor Joseph Piotroski, a professor of accounting at the University of Chicago Booth School of Business. The Piotroski Score is based on nine fundamental financial ratios that are grouped into three categories: profitability, leverage, and liquidity.

The profitability ratios are used to assess a company's ability to generate profits. The leverage ratios are used to assess a company's debt load and financial risk. The liquidity ratios are used to assess a company's ability to meet its short-term obligations.

The Piotroski Score is calculated by assigning a score of 0 to 9 to each of the nine financial ratios. A score of 0 indicates that the company is in poor financial health, while a score of 9 indicates that the company is in excellent financial health. The overall Piotroski Score is the sum of the nine individual scores.

The Piotroski Score is a valuable tool for investors because it provides a quick and easy way to assess a company's financial health. The score can be used to identify companies that are undervalued or overvalued. It can also be used to compare companies within the same industry.

The Piotroski Score is not without its limitations. The score is based on historical financial data, and it does not take into account future events or changes in the business environment. Additionally, the score can be difficult to interpret for investors who are not familiar with financial ratios.

Despite its limitations, the Piotroski Score is a valuable tool for investors who are looking for a quick and easy way to assess a company's financial health. The score can be used to identify companies that are undervalued or overvalued, and it can also be used to compare companies within the same industry.