ROA improving
What it measures¶
ROA — return on assets — is a year's net income divided by the total assets held at the start of that year (see ROA positive). This check compares the latest fiscal year's ROA with the year before and asks: did it rise? The figure shown is the change in percentage points — the plain difference between two percentages: from 8% to 6% is a fall of 2 percentage points.
Why it is on the page¶
A level tells you where a company stands; a change tells you which way it is moving. Piotroski's checklist includes the change because improving profitability separated stronger from weaker companies in his study even among those that were already profitable. The comparison is with the company's own past, so the line is the same whatever the industry.
Thresholds, their source and the population they were fitted on¶
| Result | When |
|---|---|
| ✓ passed | the latest year's ROA is higher than the year before's (change above 0) |
| ✕ failed | it is the same or lower |
| ○ not evaluable | one of the two years' ROA cannot be computed — three year-end balance sheets and two income statements are needed |
- Source: Piotroski (2000), the check he called
F_ΔROA. - Fitted on: US companies whose shares were priced low against the equity on their balance sheet, fiscal years 1976–1996.
- Evidence grade: peer-reviewed and replicated.
- Basis: own history — the company against its own previous year.
A worked example¶
Honeywell International: ROA was about 9.3% in fiscal 2024 and 6.3% in fiscal 2025, a change of −3.0 percentage points, so the check failed (statements stored on 25 October 2026).
Apple, the same year: ROA rose by 4.1 percentage points to 30.7%, so the check passed.
What “No verdict” means here¶
The check needs two consecutive years of ROA, and each ROA needs the balance sheet of the year before it. A company with only two stored years therefore cannot run it; it is not evaluable, named in the evidence panel and left out of the area's count — never counted as a failure.
What the verdict is and is not¶
A pass says the return on assets was higher than the year before. It does not say the return is high, and a fall after an exceptional year can still leave a very profitable company. It is not a forecast that the direction continues and not an instruction to trade the shares.