I made a metric scoresheet ranking my stocks, but I am worried that I am inaccurately measuring things.
I am not very knowledgeable with stocks, and so to research the ones I have invested into I decided to create a scoresheet that ranks my stocks on several categories. Though I am worried that it isn't accurate, contradicts itself, if the numbers for scores are unrealistic, or maybe if I just misunderstood it. Any help would be great. Below is the template.
An important note is that if a certain category isn't available or applicable, I simply don't count it and I use the final percentage to get an even representation.
**Profitability (25 points)**
a. Net margin (10 points)
|\>25% |10 (points) |
|:-|:-|
|15-25%|8|
|10-15%|6|
|5-10%|4|
|<5% |2|
|negative|0|
b. ROE: Return on Equity (10 points)
|\>30% |10|
|:-|:-|
|20-30%|8|
|15-20%|6|
|10-15%|4|
|5-10% |2|
|<5%|0|
Check debt to make sure it is not distorted.
If Net Debt/EBITDA > 3, reduce ROE score by 2 points.
c. Gross Margin Stability (5 points)
|Stable/Rising for 5 years|5|
|:-|:-|
|Slight decline (>3%) |4|
|Moderate Decline|2-3|
|Highly volatile |0-1|
2. **Cash Quality (20 points)**
1. Cash from Operations ≥ Net income (8 points)
|\>1.1|8|
|:-|:-|
|0.9-1.1|6|
|0.7-0.9|4|
|0.5-0.7|2|
|<0.5|0|
1. Free Cash Flow Conversion (7 points)
FCF / EBITDA
|\>1|7|
|:-|:-|
|0.8-1|6|
|0.6-0.8|4-5|
|0.4-0.6|2-3|
|<0.4|0-1|
1. Cash Stability (5 points)
FCF Consistency over 5 years
|Positive all 5 years|5|
|:-|:-|
|4 years positive|4|
|Mixed but up|3|
|Mostly negative but improving|2|
|Negative and volatile|0-1|
**2. Growth (20 Points)**
1. ~~Revenue CAGR (8 pts)~~
~~3-year compound annual growth rate.~~
Revenue growth rate
|\>30%|8|
|:-|:-|
|20-30%|6|
|10-20%|4|
|5-10%|2|
|<5%|0|
1. EPS Growth (7 pts)
3-year EPS CAGR.
More important than revenue because it reflects profitability scaling.
EPS growth rate
|\>30%|8|
|:-|:-|
|20-30%|6|
|10-20%|4|
|5-10%|2|
|<5%|0|
1. Rule of 40 (5 points)
Only for high-growth SaaS or data companies
|≥ 50%|5|
|:-|:-|
|40-50%|4|
|30-40%|2-3|
|<30%|0-1|
3. **Balance Sheet Strength** (15 Points)
1. Net Debt / EBITDA (6 pts)
|Net Cash (negative) |6|
|:-|:-|
|0-1|5|
|1-2|4|
|2-3|2|
|\>3|0|
B) Interest Coverage (5 pts)
EBIT ÷ interest expense.
|\>10|5|
|:-|:-|
|6-10|4|
|3-6|3|
|1.5-3|1-2|
|<1.5|0|
C) Liquidity (4 pts)
Current ratio (Current assets ÷ current liabilities).
|\>2|4|
|:-|:-|
|1.5-2|3|
|1-1.5|2|
|<1 |0-1|
4. **Shareholder Treatment** (0 Points)
A) Dilution Trend (5 pts)
5-year share count change.
|Share count reduced >5%|5|
|:-|:-|
|Stable (+- 2%)|4|
|\+2-5%|3|
|\+5-10%|2|
|\>10%|1|
5. **Valuation (10 Points)**
* Avoid single metrics like P/B universally.
A) P/E Relative to Growth (5 pts)
Use PEG logic:
PEG = P/E ÷ Growth Rate
|<1|5|
|:-|:-|
|1-1.5|4|
|1.5-2|2-3|
|2< |0-1|
B) Enterprise value (EV) / EBITDA vs Sector (5 pts)
Compared to the sector median → EV/EBITDA.
|30% below (relative to sector)|5|
|:-|:-|
|Slightly below|4|
|Around median|3|
|Slightly above|2|
|30%+ a bove |0-1|
Again any help would be so greatly appreciated.