Introduction
Welcome to the mid cap Piotroski F-Score screen for April. 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 |
|---|---|---|---|---|
WGO | Winnebago Industries | 9 | 2.8 | 16.6 |
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. Most mid cap stocks with solid 9 Piotroski F-Score sell at premium multiples.
Improving fundamentals is the key criteria to gain a high Piotroski F score. It is easy to see why Winnebago Industries could see improving fundamentals in the recent years. As the pandemic shutdown most travel options and staying in hotels being no longer safe, RVs took off in popularity. Additionally the shift to remote work and remote learning makes it possible for people to be highly mobile. While the company is currently benefitting from these possibly short term trends, I expect that even when we get back to normal, many of the remote work/study and extra mobile population trends will continue at increased levels.
The valuation for WGO is reasonable and significant future growth in sales and EPS is expected driving down the PEG ration to under 1.
The stock is sufficiently interesting at this point to evaluate further.
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.