The Cashflow Return on Assets is a profitability metric that measures how efficiently a company uses Assets to generate Operating Cashflows. It is calculated by dividing Operating Cashflows by the Asset position on the balance sheet at the beginning of the financial period.
This takes a company’s operating cashflows and divides them by the total assets of the company to produce a measure of how efficiently assets are being used to generate cashflow. For example, if a company has operating cashflows of £1m and £10m of assets on its balance sheet, then the ROA is calculated as 10%.
This metric is used to calculate a nine-criteria scoring system that analyses a company's overall fundamental strength. Strong cashflows are typically a sign of financial strength.
Accordingly, one of Piotroski's nine criteria checks whether the Cashflow Return on Assets (ie.Cashflows / Assets) exceeds the Return on Assets (ie. Earnings / Assets). A company would have a higher F-Score if Cashflow ROA exceeds the regular ROA (all other factors being equal).
| Ticker | Name | CFROA | StockRank™ |
|---|---|---|---|
| LON:KLSO | Kelso group | 260.50 | 59 |
| LON:RMV | Rightmove | 203.14 | 48 |
| LON:PREM | Premier African Minerals | 196.17 | 4 |
| LON:JZCP | JZ Capital Partners | 142.13 | 77 |
| LON:ZPHR | Zephyr Energy | 67.11 | 41 |