Developed by Josef Piotroski the Piotroski F-Score was designed to identify value stocks that are in recovery mode. The test uses nine variables based on various financial metrics, including cash flow, profitability, debt, return on assets and shareholder dilution to arrive at a score between zero and nine. One point is awarded for each criteria the company passes and the stocks that score the highest, eight, or nine are regarded as being the strongest candidates for recovery.
Five low price to book candidates which have a high Piotroski F-Score
Of course, the Piotroski F-Score is designed to be used with other value screening tools, Piotroski recommended scoring the bottom 20% of the market in terms of price to book value and then working from there. Here are five low price to book candidates which have a high Piotroski F-Score.
- Company: Noble Corp plc (NYSE:NE)
Market Cap.
$5.2 billion
Forward P/E
8.9
P/B
0.7
Piotroski F-Score
9
As one of the offshore drillers, Noble Corp plc (NYSE:NE) is one of the most beaten down stocks on the market. However, the company remains cash generative, produces high quality earnings, is reducing debt and trading without having to raise funds from shareholders. Additionally, the company’s costs are falling and it’s becoming steadily more productive. On that basis Noble has a high F-score of 9, making it an attractive recovery play.
- Company: Owens Corning (NYSE:OC)
Market Cap.
$4.1 billion
Forward P/E
15.4
P/B
1.1
Piotroski F-Score
9
Owens Corning (NYSE:OC) is hardly cheap but the company is steadily improving, which could justify the current high valuation. As with Nobel, Owens easily passes all of the F-scores key criteria which gives it a score of nine – full marks.
- Company: Cabot Corp (NYSE:CBT)
Market Cap.
$3 billion
Forward P/E
13.2
P/B
1.4
Piotroski F-Score
9
Once again, Cabot Corp (NYSE:CBT) is hardly cheap but the company’s high F-score shows that its earnings are of a high quality. A P/B figure of less than 1.5 and a forward P/E of 13.2 meet Graham’s value criteria. So, for value investors struggling to find a deal in the current market, Cabot could be a good bet.
- Company: Vantage Drilling Company (NYSEMKT:VTG)
Market Cap.
$260 million
Forward P/E
4.1
P/B
0.5
Piotroski F-Score
9
There’s no denying that Vantage Drilling Company (NYSEMKT:VTG) is a risky bet. The company is another offshore driller but unlike Noble, Vantage is struggling with a high level of debt and is fighting off multiple lawsuits. Still, a F-score of 9 indicates that, on the whole, the group’s financial performance is improving. A rock-bottom valuation has priced in much of the risk surrounding this company.
- Company: Sektkellerei Schloss Wachenheim AG (ETR:SWA)
Market Cap.
€99 million
Forward P/E
8.8
P/B
0.7
Piotroski F-Score
9
Over in Europe there are plenty of bargains to be had. Sektkellerei Schloss Wachenheim AG (ETR:SWA) is located within Germany, one of the region’s more stable economies. Producer of sparkling wine, Sektkellerei currently looks cheap, and according to the Piotroski F-Score, the company has high quality earnings. Sales have grown at a steady compounded annual growth rate of 1.9% over since 2009 and earnings per share have expanded at a CAGR of 18% over the same period. An undervalued European opportunity worth further research.
