SummaryThe G-Score is a fundamental analysis screen which ranks highly valued stocks – or “low book to market” stocks – according to 8 growth criteria. Just as the Piotroski F-Score aims to separating winners amongst the value universe (the “dusty gems”), the G-Score seeks to separate out the winning growth/glamour stocks from the “fallen stars”. BackgroundPartha Mohanram is Associate Professor of Finance at Columbia University. His 2004 paper extends the analysis done by Piotroski whose F-Score applies fundamental analysis to filter value – or “low book to market” value stocks into winners and losers. Mohanram’s G-Score is an 8 factor model which focuses instead on the other end of spectrum of Book/Market ratios, namely growth – or “low book to market” – stocks, using three types of signals:Signals based on Earnings and Cash Flow Profitability (criteria 1, 3 amp; 3 below) – This is because firms that are currently profitable are seen as likely to be fundamentally strong and maintain their fundamental strength in the future.
Signals Related to Na? ?ve Extrapolation (4, 5) – Researchers have shown that the stock market tends to naively extrapolate current fundamentals for highly valued stocks – stability…
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