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. This sounds exciting, but the group is heavily loss-making.
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.
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.
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