Does the business earn money on the capital it uses, and does it keep doing so?
| Check | What it measures | How it scores threshold, then points out of 10 |
|---|---|---|
| Net margin | Net income over revenue, latest year |
20%+
10
15%+
8
10%+
6
5%+
4
0%+
2
Loss
0
|
| Return on equity | Net income over shareholders' equity |
20%+
10
15%+
8
10%+
6
5%+
4
0%+
2
Loss
0
|
| Return on invested capital | EBITDA over debt plus equity |
20%+
10
15%+
8
10%+
6
5%+
4
0%+
2
Loss
0
Runs a little high, because EBITDA adds back depreciation. |
| Free cash flow margin | Operating cash flow less capital spending, over revenue |
15%+
10
10%+
8
5%+
6
0%+
3
Negative
0
|
| Profitable years | Share of the fiscal years on file with a net profit |
All
10
Three in four
7.5
Half
5
One in four
2.5
None
0
The share of profitable years, out of 10. |
| Margin trend | Latest net margin against the average of the years before |
Rising
10
Slipping under 2 pts
5
Falling more
0
|
Could it get through two bad years without having to raise money?
| Check | What it measures | How it scores threshold, then points out of 10 |
|---|---|---|
| Cash to debt | Cash and equivalents over total debt |
1x+
10
0.5x+
7.5
0.25x+
5
0.1x+
2.5
Less
0
No debt at all scores 10. |
| Equity to assets | Shareholders' equity over total assets |
0.6+
10
0.45+
7.5
0.3+
5
0.15+
2.5
Less
0
|
| Debt to EBITDA | Years of operating earnings needed to repay the debt |
1x or less
10
2x
7.5
3x
5
4x
2.5
Over 4x
0
|
| Quality signals | Seven of Piotroski's nine: profit, operating cash flow, cash flow above profit, return on assets up, debt down, turnover up, no dilution |
7 of 7
10
5 of 7
7.1
3 of 7
4.3
1 of 7
1.4
None
0
Signals passed out of 7, scaled to 10. |
Is it getting bigger, and is it still?
| Check | What it measures | How it scores threshold, then points out of 10 |
|---|---|---|
| Revenue growth | Compound yearly growth over up to five years |
20%+
10
15%+
8.5
10%+
7
5%+
5
0%+
2.5
Shrinking
0
A year. |
| Revenue growth, 3 years | The last three years alone |
20%+
10
15%+
8.5
10%+
7
5%+
5
0%+
2.5
Shrinking
0
Catches a slowdown the longer figure hides. |
| EBITDA growth | Compound yearly growth in operating earnings before depreciation |
20%+
10
15%+
8.5
10%+
7
5%+
5
0%+
2.5
Shrinking
0
|
| EPS growth | Compound yearly growth in diluted earnings per share |
20%+
10
15%+
8.5
10%+
7
5%+
5
0%+
2.5
Shrinking
0
|
| FCF per share growth | Compound yearly growth in free cash flow per share |
20%+
10
15%+
8.5
10%+
7
5%+
5
0%+
2.5
Shrinking
0
|
What are the people running it doing with their own money? This pillar is InsiderClue's own.
| Check | What it measures | How it scores threshold, then points out of 10 |
|---|---|---|
| Insiders buying | Different officers and directors who bought on the open market in twelve months |
Three or more
10
Two
8.5
One
7
|
| Largest buy, of own stake | The biggest purchase against what that person already held |
50%+
10
20%+
8
5%+
6
Less
5
|
| Cluster buy | Three or more insiders bought within thirty days |
Yes
10
Counts only when it happened. |
| Largest sale at will | The biggest unscheduled sale against what that person held |
Up to 5%
4.5
Up to 20%
3.5
Up to 50%
2
More
0
Scheduled 10b5-1 sales count for nothing. |
The method follows the score of a separate research tool, check for check, with its valuation and momentum pillars left out and the insider pillar added. It is recalculated after each refresh.