Joel Greenblatt's Magic formula is a well-known index when screening stocks for stock investment, but in this article, another stock screening method, Piotroski. I think I introduced you to F-Score.
Of the 9 criteria below, if the target issue meets the criteria, +1 point will be added.
2-1 Profitability Criteria If the criteria are met, the score will be 1 point, and if not, the score will be 0 points.
| number | Criteria | score |
|---|---|---|
| 1 | The return for the past year has been positive | 0 or 1 |
| 2 | Operating cash flow for the past year(operating cash flow)Is a plus | 0 or 1 |
| 3 | ROA of this year compared to the previous year(Return on total assets)Is rising | 0 or 1 |
| 4 | Operating cash flow for this year/Total assets>Being ROA | 0 or 1 |
| Subtotal score 1 | 0 ～ 4 |
2-2 Leverage, Kiquidity and Source of Funds Criteria
| number | Criteria | score |
|---|---|---|
| 5 | This year's long-term liabilities have decreased compared to the previous year | 0 or 1 |
| 6 | Current ratio of this year compared to the previous year(*1)Is rising | 0 or 1 |
| 7 | Not issuing new shares in the previous year | 0 or 1 |
| Subtotal score 2 | 0 ～ 4 |
(* 1) The current ratio (= current assets / current liabilities) is an index showing how much assets that can be cashed within one year exceed the liabilities that should be repaid within one year.
2-3 Operating Efficiency Criteria
| number | Criteria | score |
|---|---|---|
| 8 | Gross profit for this year compared to the previous year(gross margin)Is rising | 0 or 1 |
| 9 | This year's capital turnover compared to the previous year(asset turnover ratio)Is rising | 0 or 1 |
| Subtotal score 3 | 0 ～ 2 |
Gross margin = Sales-Cost of sales Asset turnover ratio = sales / total capital
2-4 F-Score
F-Score is the score of the above 9 items (= score subtotal 1 + score subtotal 2 + score subtotal 3). </ b> We will invest in stocks with F-Score of 8 points or more, and recalculate F-Score once every six months or once a year. It is generally said that the F-Score concept is suitable for selecting small-cap and medium-cap stocks.
3 Coming Soon How much return can you get if you take the F-Score strategy for Japanese stocks? I would like to do coding in Python and verify it.
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