Yahoo Finance Why you need to look at Blue Prism's Piotroski F-Score (LON:PRSM)
Blue Prism (LON:PRSM) is engaged in robotic process automation (RPA), enabling blue-chip organizations to create a digital workforce powered by the Company's software robots that are trained to automate routine back-office clerical tasks. It operates in Manchester and London (the United Kingdom), and Miami, Chicago, New York and San Francisco (the United States).
For the fiscal year ended 31 October 2019, Blue Prism Group PLC revenues increased 83% to £101M but net loss also increased from £26.2M to £78.2M. That's quite a loss.
Unfortunately, applying the Piotroski F-Score to this mid cap doesn't do much to dispel these concerns... We'll get into this later, but first a quick refresher on what the F-Score means.
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The Piotroski F-Score: one indicator to rule them all?
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. Its secret sauce is 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 stay ahead of the game.
When a stock gets beaten down it ends up in the bargain basement of the stock market. From here there are generally three outcomes. The stock either:
Stumbles along, zombie-like,
Tumbles into administration, or
Recovers emphatically
Stanford Finance Professor Joseph Piotroski wanted to sort the wheat from the chaff. After settling on the F-Score, he produced some astonishing results.
Why the F-Score does not like Blue Prism
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 Blue Prism gets a lowly F-Score of 2 out of a possible 9. Food for thought for anyone looking to hold onto their money. We can see which areas of the checklist Blue Prism fails in the graphic below:
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