Our Scoring Methodology Explained: How We Rate Companies
Every analysis on DailyStock.pro includes a score. But what goes into that score? Here is a transparent look at our methodology — the 8 KPIs we track, how we weight them, and what the final number means.
The 8 Quality KPIs
We score every company on 8 key performance indicators that institutional investors use to identify quality compounders. These KPIs fall into four categories: profitability, growth, financial health, and valuation.
Profitability: ROIC and EBIT Margin tell us whether the business earns high returns on its capital and has pricing power. These are the most heavily weighted metrics because they reveal the company's competitive advantage.
Growth: Revenue CAGR and Earnings Consistency measure whether the company is expanding and whether its growth is reliable. Consistent growth is more valuable than fast but erratic growth.
Financial Health: Net Debt/EBITDA and Shareholder Yield show how the company is financed and how it treats shareholders. Low debt and high shareholder yield are signs of financial discipline.
Valuation: FCF/EV Yield and PEG Ratio tell us whether the stock is reasonably priced relative to its cash generation and growth rate. Even the best company is a bad investment at the wrong price.
How We Weight Each KPI
Not all KPIs are equal. ROIC gets the highest weight because it is the single most important indicator of business quality. EBIT Margin and FCF Yield receive above-average weight. Valuation metrics receive moderate weight — we care about price, but quality comes first.
Each KPI is scored from 1 (weak) to 5 (strong) based on the company's 5-year history and current position. A company that has earned 20%+ ROIC for 5 years scores a 5 on ROIC. A company with declining margins and high debt scores a 1.
Reading the Score
The overall score is a weighted average of all 8 KPIs, normalized to a scale of 0-100. A score above 80 is exceptional — the company demonstrates strong quality across all dimensions. A score of 60-80 is good, indicating a solid business with some concerns. Below 60 suggests the company does not meet our quality threshold.
A high score does not mean "buy." A low score does not mean "sell." The score is a tool to help you compare companies and identify where further research is needed. Always combine the quantitative score with qualitative judgment about the moat, management, and competitive position.
Beyond the Numbers
Our daily analyses go beyond the quantitative score. Each report includes a qualitative assessment of the company's economic moat, competitive position, management quality, and key risks. These factors cannot be captured in a number, but they are essential to understanding whether a company can sustain its quality over time.
The final output is not a recommendation. It is a framework — the same framework institutional investors use — delivered in a format that any individual investor can understand and act on.