At the risk of being burned at the stake, I am going to speak some heresies about the F-Score.
First, statistics -- F-score, NCAV, magic formula, P/B, golden cross, whatever -- may be useful for stocks taken two handfuls at a time, but they are not, by themselves, useful for evaluating any individual stock.
Second, the F-score is a momentum indicator. It has only the most occasional and coincidental relationship with quality or value.
Look at any of the indicators/criteria, and they are, with the exception of CFO>Net income, flimsy at best, nonsensical at worst:
- no net pension liabilities,
- no changes in net pension liabilities as a result in changes in the prices of securities prices,
- no leases,
- negative working capital is bad,
- excess cash is bad,
- dilution is always bad, etc.
Terrible stuff. It is what Baudrillard, bless him, would call a third order simulacrum.
To my mind, the F-score relies on two things: (a) selling into hype; and (b) timing of cylicals.
Compare it to the most well-known of momentum strategies and I think you'll see what I mean:
Data source: http://www.aaii.com/stock-screens/performance
Where there is no danger of overexcited buyers -- Japan, for example -- it doesn't work.
Still, I get it. I see its appeal in the same way that I see the appeal of buying stocks whose 50 MA crosses the 200 MA, or whose relative price strength is greater than 1, or whatever else.
But, in my view, it is a mistake to use the F-score at the level of an individual stock just as it is incorrect to think of it as a proxy for quality.