Definition of 'Piotroski Score'
A discrete score between 0-9 which reflects nine criteria used to determine the strength of a firm's financial position. The Piotroski score is used to determine the best value stocks, nine being the best. The score was named after Chicago Accounting Professor, Joseph Piotroski who devised the scale according to specific criteria found in the financial statements. For every criteria (below) that is met the company is given one point, if it is not met, then no points are awarded. The points are then added up to determine the best value stocks.
Investopedia explains 'Piotroski Score'
If a company has a score of 8 or 9 it is considered strong. If the score adds up to between 0-2 points, the stock is considered weak. Piotroski's April 2000 paper Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers, demonstrated that the Piotroski score method would have seen a 23% annual return between 1976 and 1996 if the expected winners were bought and expected losers shorted. With any investment system, looking at past results doesn't always means it will work in the future, but having an investment plan and rules is never a bad idea.