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Will De La Rue's (LON:DLAR) share price suffer because of its poor F-Score?

It's hard to keep tabs on hundreds of companies, but that's what we have to do if we want to find overlooked investment opportunities. Sometimes there just isn't time to dig through the annual accounts of multiple companies, however.

Thankfully there are measures like the Piotroski F-Score, which distil a wealth of financial data into one easily comparable score. Unfortunately, what the F-Score algorithm says for Industrials operator De La Rue (LON:DLAR) is not good. First a little bit more on what this number means.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:DLAR »

What the Piotroski F-Score says about De La Rue (LON:DLAR)

The Piotroski F-Score is a nine-strong checklist split up into three sections, each looking at a different part of a company's financial situation. Unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving.

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Piotroski found that weak stocks with an F-Score of 2 or less are five times more likely to either go bankrupt or delist due to financial problems. Working our way through Piotroski's checklist, we can see that De La Rue gets a lowly F-Score of 1 out of a possible 9...

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This means that not only is De La Rue (LON:DLAR) financial health deteriorating, it currently fits in with the stocks that Piotroski identified as being five times more likely to go bankrupt or delist.

Looking at the group's recent financial results, we can see that for the six months ended 28 September 2019, De La Rue plc revenues decreased 10% to £232.3m and the company swung from profit to a net loss of £11.1m.

This performance highlights why paying attention to systematic checklists such as the F-Score can provide some much-needed clarity and help us make considered, consistent decisions.

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The problem areas for De La Rue identified here can be explored in more depth on Stockopedia's research platform. All the best investors have stringent due diligence processes that reduce the chances of them suffering big losses, so why not take a leaf out of their book?

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