Our Business Quality Score rates every company based on a composite of four broad quality metrics:
- Growth: This metric measures changes in a company’s finances such as sales, profit, return on equity (ROE), return on assets (ROA), and cash flow over the past five years.
- Profitability: This metric measures a company’s current level of profitability relative to its assets, sales, and shareholder equity.
- Safety: This metric measures a company’s financial strength (debt burden, credit risk, etc.) and its stock’s historical volatility versus the overall market.
- Payout: This metric measures how much of what a company earns benefits shareholders via dividends, net share buybacks, and debt repayment.
Our algorithms first calculate the current quality score for each stock compared to its history and all other stocks in our database. They then average those scores for each stock and rate the stock on a quality scale from 0 (lowest quality) to 100 (highest quality).