Altman Z-Score and Piotrosky Score
Where to find key financial metrics and how to calculate the scores using fundamental data for stock analysis
As outlined in our previous article, fundamental data plays a crucial role in evaluating a company’s value and conducting asset analysis.
In this article, we introduce two essential financial scores — Altman Z-Score and Piotroski Score — that can help assess a company’s financial health. What sets this guide apart is its practical approach: we provide direct mappings to exact fields from financial reports using our Fundamental Data API. This allows for a fast, efficient, and straightforward calculation of these scores with our data.
Altman Z-Score
The Altman Z-score is a financial metric designed to assess a company’s risk of bankruptcy (see Wikipedia article for more details).
It is calculated using five key financial ratios derived from a company’s annual report. This score helps determine whether a company is likely to face financial distress.
The formula for the Altman Z-score is:
Altman Z-score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
- A = Working Capital / Total Assets
- B = Retained Earnings / Total Assets
- C = Earnings Before Interest and Tax (EBIT) / Total Assets
- D = Market Value of Equity / Total Liabilities
- E = Sales / Total Assets
How to Retrieve These Metrics Using EODHD’s Fundamental Data API
Our Fundamental Data API provides all the required fields directly or allows for easy calculation:
- Working Capital =
totalCurrentAssets-totalCurrentLiabilities(Both in the Balance Sheet section) - Total Assets =
totalAssets(Balance Sheet section) - Retained Earnings =
retainedEarnings(Balance Sheet section) - EBIT =
ebit(Income Statement section) - Market Value of Equity =
SharesOutstanding(Shares Stats section) × Current Share Price (retrievable from our End-of-Day Data API) - Total Liabilities =
totalLiab(Balance Sheet section) - Sales (Total Revenue) =
totalRevenue(Income Statement section)
With these data points available through our API, calculating the Altman Z-score becomes a quick and efficient process.
Piotroski Score
The Piotroski Score is a financial metric that assesses a company’s financial strength on a scale from 0 to 9.
A higher score (8–9) indicates strong financial health, while a lower score (0–2) suggests weak financial standing.
The score is determined by evaluating nine financial criteria across three categories: Profitability, Leverage & Liquidity, and Operating Efficiency. Each criterion is assigned 1 point if met and 0 points if not.
1. Profitability Metrics
+1 point if netIncome (Cash Flow section) is positive.
+1 point if ReturnOnAssetsTTM (Highlights section) is positive.
+1 point if totalCashFromOperatingActivities (Cash Flow section) is positive.
+1 point if totalCashFromOperatingActivities is greater than netIncome.
2. Leverage, Liquidity, and Source of Funds
+1 point if longTermDebt in the current year is lower than the previous year.
+1 point if the current ratio (calculated as totalCurrentAssets / totalCurrentLiabilities, Balance Sheet section) is higher than the previous year.
+1 point if there were no new shares issued in the last year (no dilution).
3. Operating Efficiency
+1 point if gross margin (calculated as (totalRevenue - costOfRevenue) / totalRevenue, Income Statement section) is higher than the previous year.
+1 point if the asset turnover ratio (totalRevenue / totalAssets, Income Statement & Balance Sheet sections) is higher than the previous year.
Interpreting the Piotroski Score
- 0–2 → Weak Financial Position
- 3–7 → Moderate Strength
- 8–9 → Strong Financial Position
With EODHD’s Fundamental Data API, retrieving the necessary data for Piotroski Score calculation is fast and efficient. All required metrics are either directly available or can be derived from the API feed.
Please note that this article is for informational purposes only and should not be taken as financial advice. We do not bear responsibility for any trading decisions made based on the content of this article. Readers are advised to conduct their own research or consult with a qualified financial professional before making any investment decisions.
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