The Piotroski screen remains one of our most popular screens. It's a buy-and-hold strategy based on purchasing high book-to-market firms with strong fundamental signs. Piotroski designed the f-score, which is the sum of 9 binary scores in 3 categories: profitability (Return on Assets, Cash Flow Return on Assets, Change in Return on Assets, Accrual), funding (Change in gearing or leverage, Change in working capital, Change in outstanding shares), efficiency (Change in Gross Margin, Change in asset turnover).

Companies with a high Piotroski score are more likely to increase future earnings and have a smaller risk of failing. Piotroski also found that this screen works particularly well on small and medium firms, companies with low share turnover, and firms with no analyst following. The market initially underreacts to the historical information of these companies, and it can take several months for the stock price to correct.

We selected the Piotroski template screen and applied the following extra filters:

1. We only selected companies with a primary listing on stock markets in Western Europe.
2. We filtered out companies that did not post any quarterly results ending in the last 6 months.
3. We set a minimum daily trading value of 10K Euro.
4. We selected companies with a market capitalization between 50 million and 1 billion Euro.

With these filters in place, the Piotroski screen takes the top 20% of companies ranked by book-to-market and then sorts by f-score. It came up with the following companies:

• BVZ Holding AG: a Switzerland-based holding company primarily engaged in the operation of railways in Switzerland.It has a maximum score of 9 points.
• IFA Hotel & Touristik AG (IFA): a Germany-based company which is active in the tourism sector. The Company owns and operates hotels, including holiday hotels and apartments in Germany, Spain, Austria, and the Dominican Republic. It also runs wellness hotels, golf courses, and travel agencies. It didn't get the top score as the number of outstanding shares increased.
• Bourbon: a France-based company which provides marine services for offshore oil and gas clients.This company didn't get the top score as the return on assets decreased compared to last year.
• Hornbach Holdings: a Germany-based company engaged in the operation of a chain of megastores, offering do-it-yourself (DIY), home improvement, and gardening products. It didn't get the maximum Piotroski score due to a reduction of working capital.
• Einhell Germany: a company that produces car, home and garden tools. Einhell also saw a reduction in working capital.

The screenshot at the top includes the remainder of the list and shows what type of companies are selected by this screen. According to Piotroski, this investment strategy generated a return of 23% annually between 1976 and 1996.

With quotes refreshed twice a week and up-to-date quarterly results on 32.500 stocks, our screener always gives you the latest list at the click of a button.

In the next article, we will have a look at the Greenblatt Magic Formula screen focussing on the US, Canada, and Mexico.