The ranking measure: Nine pass/fail tests from Piotroski (2000), comparing the latest trailing twelve months with the twelve months a year earlier, from SEC filings: (1) net income positive; (2) operating cash flow positive; (3) return on assets up; (4) operating cash flow above net income; (5) long-term debt to average assets down; (6) current ratio up; (7) no rise in shares outstanding; (8) gross margin up; (9) asset turnover up. The score is the number of tests passed, 0 to 9; companies with the same score share a rank. Approximations: trailing twelve months instead of fiscal years; 'no equity issued' is measured as no rise in period-end shares outstanding; a company with no long-term debt in both years does not pass test 5, as in the paper (leverage must fall).

Who is included: Passes data-quality checks; revenue of at least $100M; every input reported for the needed dates, including gross profit and long-term debt; not a bank, insurer or REIT.

A new edition is published each calendar quarter; past editions are kept unchanged. Observations, not recommendations — a position on this ranking is a description of reported figures, never advice.

Research cited

  • Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research.