Introduction
Welcome to the mid cap Piotroski F-Score screen for November. Piotroski f-score looks for stocks of the companies with solid fundamentals that are improving. Joseph Piotroski, then of University of Chicago GSB, laid out these fundamental filters that in his research adds about 7.5% additional alpha to a standard P/B ratio screen. The Piotroski F-Score is a filter for the quality of the operations and its trajectory of improvement. It is not a statement on the valuation.
Screen Details
This screen looks for mid cap stocks between $2 Billion and $5 Billion in market capitalization with solid fundamentals that are getting better, as measured by Piotroski F-Score:
- Piotroski F-Score > 8
This filter does not screen for low price/book ratio or any other metric. The resulting list of stocks need to be evaluated for these additional value filters.
The Screen Results
Stock | Company | Piotroski F-Score | P/B Ratio | P/E Ratio |
|---|---|---|---|---|
CR | Crane | 9 | 2.9 | 15.1 |
EVTC | Evertec | 9 | 9.0 | 23.0 |
FUL | H. B. Fuller | 9 | 2.2 | 18.7 |
INT | World Fuel Services | 9 | 1.5 | 18.9 |
Notes and Observations
Since valuations are not part of the Piotroski F-Score evaluation, they need to be applied before we can make any judgement on these stocks. We are able to use all other valuation tools at our disposal. As can be seen from the list, most mid cap stocks with solid 9 Piotroski F-Score sell at premium multiples.
Once I look at other fundamental data, I find CR and INT to be worthy of deeper review. The attached video describes the reasoning behind this and discarding the other stocks at this stage of the research.
Ending Note
I like Piotroski f-score as an additional layer of quality on the value stocks that you are evaluating. The f-score by itself is not a complete screen. Other valuation filters need to be applied along side the Piotroski f-score filters. As you can see, not many stocks succeed on the F-score =9 check, but from those that do, even fewer stocks are actually good values.
