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Piotroski Stock Screener

Use this stock screener to select small and medium-sized undervalued companies using a strategy described by Joseph Piotroski in "Value Investing, the use of historical information to separate the winners from the losers." .


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Return generated by following the >Piotroski Stock Screener since 1999 until now and investing in all top 30 stocks every year on 15th of June, holding for 1 year only. The intial investment is 100.000€ and every year the proceeds from the sales are invested equally in the top 30 stocks at that time. The red line shows the return of a 100.000€ investment in a Stoxx 600 tracker in June 99.

In his paper the University of Chicago accounting professor shows that by selecting low Price-to-Book companies and by filtering out the best companies using a set of accounting signals, one could have generated a 23% average yearly return from 1976 to 1996.

Piotroski starts by selecting the top 20% Book-to-market (Lowest Price-to-Book) stocks. These are typically companies in financial distress, however by looking at a set of 9 signals, he's able to filter out companies for which the economic conditions are improving. These signals can be grouped in 3 area's:

Profitability

ROA
 Positive return on assets (ROA) in the current year (1 point) ROA = profit excluding extraorinary items. Is the company making profit?
CFO
 Positive operating cash flow in the current year (1 point) Is the company generating cash?
∆ROA
 Higher ROA in the current period compared to the ROA in the previous year (1 point) Is the profit increasing?
CFO>ROA
 Cash flow from operations are greater than ROA (1 point) Is the profit increase real or is the company manipulating it with accrual adjustments?

Leverage, Liquidity and Source of funds

∆Lever
 Lower ratio of long term debt to in the current period compared value in the previous year (1 point) Did the company reduce long term debt?
∆Liquid
 Higher current ratio this year compared to the previous year (1 point) current ratio = current assets / current liabilities Did the company assets value improve compared to it's liabilities?
∆EQ_Offer
 No new shares were issued in the last year (1 point) Did the company have to issue new shares to attract capital at the current low valuation of the stock?

Operating Efficiency

∆Margin
 A higher gross margin compared to the previous year (1 point) Is the company able to reduce the cost of its products and is it able to increase prices?
∆Turn
 A higher asset turnover ratio (sales/assets) compared to the previous year (1 point) Is the company becoming more productive & efficient?

Piotroski selects only the companies that have a score of 7 or above.

Remarks: