Yahoo Finance We need to talk about Solgold's Piotroski F-Score
As investors, we want to invest in the best and avoid those heading for trouble, but it's hard to keep tabs on hundreds of companies. That's a lot of noise and we've all got lives to lead. Even though Stockopedia's StockReports provide a wealth of financial data, filtering out the most dangerous stocks can be hard to do and takes time.
But what if you could gauge financial health with a single number?
This is what the Piotroski F-Score sets out to do. Unfortunately, what the F-Score algorithm says for Healthcare operator Solgold (LON:SOLG) is not good.
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Why the Piotroski F-Score matters
The Piotroski F-Score is a nine-strong checklist split that, unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving. Keeping on top of these trends can help us anticipate how a stock might perform.
When a stock gets beaten down it falls to the bottom of the stock market. From here there it either:
Stumbles along, zombie-like,
Tumbles into administration, or
Recovers emphatically
Stanford Finance Professor Joseph Piotroski wanted to identify the latter. After settling on the F-Score, he produced some remarkable results.
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 Solgold gets a lowly F-Score of 2 out of a possible 9. This suggests further research should be conducted before making a decision on these shares.
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