Lesson 05 — Piotroski F-Score: The 9-Point Quality Checklist
Week 09 · Lesson 5 of 5 · Week 09 — Governance & Red Flags
The Piotroski FScore is a simple 0 to 9 scoring system created by accounting professor Joseph Piotroski in 2000. It checks 9 yes/no questions about a company...
What is the Piotroski F-Score?
The Piotroski F-Score is a simple 0 to 9 scoring system created by accounting professor Joseph Piotroski in 2000. It checks 9 yes/no questions about a company's financial health — and gives 1 point for each "yes."
Think of it as a quick medical check-up for a company. You don't need deep analysis — just check 9 vital signs and count how many are healthy.
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"9 mein se kitne signals green hain — woh hai F-Score."
Why it matters for beginners
You've already learned about profitability ratios (Week 07), leverage ratios (Week 08), and red flags (this week). The F-Score combines all of them into a single number you can check in 2 seconds on InvestingSamjho.
| F-Score | Interpretation | Action |
|---|---|---|
| 7–9 | 🟢 Strong fundamentals | Financials are healthy — investigate further |
| 4–6 | 🟡 Average / Mixed signals | Dig deeper — some areas need attention |
| 0–3 | 🔴 Weak fundamentals | Major red flag — avoid unless you have a strong reason |
The 9 criteria explained
The F-Score tests three areas you already know:
Profitability (4 points)
| # | Test | What it checks | You learned this in… |
|---|---|---|---|
| 1 | Positive Net Profit (PAT) | Is the company profitable? | Week 04 (P&L) |
| 2 | Positive ROA | Is it earning returns on its assets? | Week 07 (Ratios) |
| 3 | Positive Cash from Operations (CFO) | Is it generating real cash? | Week 06 (Cash Flow) |
| 4 | CFO > Net Profit | Are profits backed by cash? (Quality of earnings) | Week 06 (Cash Flow Red Flags) |
Criterion 4 is the most powerful
If cash flow from operations is LESS than net profit, the company might be showing "paper profits" that aren't real. This is the same red flag from Lesson 04's checklist!
Leverage & Liquidity (3 points)
| # | Test | What it checks | You learned this in… |
|---|---|---|---|
| 5 | Debt/Assets ratio decreased vs last year | Is the company reducing its debt burden? | Week 08 (Debt-to-Equity) |
| 6 | Current ratio improved vs last year | Can it meet short-term obligations better? | Week 05 (Working Capital) |
| 7 | No new equity shares issued | Is management avoiding dilution? | Week 05 (Equity) |
Operating Efficiency (2 points)
| # | Test | What it checks | You learned this in… |
|---|---|---|---|
| 8 | Gross margin improved vs last year | Is pricing power or efficiency improving? | Week 04 (Margins) |
| 9 | Asset turnover improved vs last year | Is it generating more revenue per ₹ of assets? | Week 08 (Asset Turnover) |
How to read it on InvestingSamjho
On any company's page, scroll to the "Scoring Models & Quality Signals" section. You'll see:
Piotroski F-Score Learn 🔗 7/9 Strong
████████████████████░░ ← green progress bar
- The bar shows how many of the 9 criteria are met
- Green (7–9) = strong, Amber (4–6) = average, Red (0–3) = weak
- Click "Learn" to come back to this lesson any time
Annual data only
The F-Score on InvestingSamjho uses annual results (not quarterly), because criteria 5–9 compare year-over-year changes. You need at least 2 years of annual data for a valid score.
Practical example
Let's say you're checking a company:
| Criterion | Result | Score |
|---|---|---|
| 1. Positive PAT | ₹120 Cr profit | ✅ +1 |
| 2. Positive ROA | 8.5% | ✅ +1 |
| 3. Positive CFO | ₹150 Cr | ✅ +1 |
| 4. CFO > PAT | ₹150 Cr > ₹120 Cr | ✅ +1 |
| 5. Debt/Assets down | 32% → 28% | ✅ +1 |
| 6. Current ratio up | 1.2x → 1.4x | ✅ +1 |
| 7. No new shares | Same shares outstanding | ✅ +1 |
| 8. Gross margin YoY change | 38% → 37% (down) | ❌ 0 |
| 9. Asset turnover YoY change | 0.8x → 0.75x (down) | ❌ 0 |
F-Score = 7/9 → Strong 🟢
Even though margins and turnover dipped slightly, the overall financial health is solid. The company is profitable, generating cash, reducing debt, and not diluting shareholders.
How to use F-Score in your analysis
- As a quick filter — When screening stocks, set F-Score ≥ 7 to focus on financially healthy companies
- As a red flag detector — If a company you like has F-Score ≤ 3, stop and understand why before proceeding
- As a trend signal — Check if F-Score is improving or declining year over year
F-Score is not enough alone
A high F-Score means financial statements look healthy — it does NOT tell you about:
- Valuation (is it expensive?)
- Growth potential (will it grow?)
- Governance quality (is management honest?)
Combine F-Score with the governance checks from this week's other lessons.
Key takeaway
The Piotroski F-Score is your 9-point financial vital signs check. It combines profitability, cash flow, leverage, and efficiency into a single 0–9 score. On InvestingSamjho, check it instantly for any company. Use it as your first quality filter — then dig deeper.
Platform action
Open any company page on InvestingSamjho → scroll to "Scoring Models & Quality Signals" → check the F-Score. If it's below 4, review the red flags checklist from Lesson 04 to understand what's going wrong.