1Eliminate
Small, illiquid and cash-starved companies hit the elimination rules; they stay off the research list whatever their score.
Stock Screening
Measure the rules that make a stock worth researching with the data we have: size, growth, profitability, health, price strength and ownership.
Fit Score22 Measurable Rules
GrowthWeight 30
Price StrengthWeight 20
ProfitabilityWeight 15
Financial HealthWeight 15
OwnershipWeight 10
Catalyst SignalsWeight 10
The Rules
22 Measurable Rules
The rules do two jobs: drop weak candidates early and show why strong ones are strong. Thresholds follow common growth-stock screens.
Elimination
Not scored; a stock that fails is capped at 45.Tiny or thinly traded stocks move on a handful of orders; a position you cannot exit when needed is not worth holding.
- Market CapAt least $300M
- Share PriceAt least $5
- Liquidity500K shares and $10M traded per day on average
Growth
4 RulesEarnings per share carry a price over time. Double-digit profit growth backed by sales growth is what we look for.
- Quarterly EPS GrowthAt least 10% year over year
- Quarterly Sales GrowthAt least 10% year over year
- Three-Year EPS GrowthAt least 10% annualized
- Source of GrowthSales should grow at least 5% while profit grows
Profitability
2 RulesA growing loss-maker owes its growth to financing; a profitable company funds its own.
- ProfitabilityPositive trailing twelve-month EPS
- MarginsGross, operating and net margins positive
Financial Health
3 RulesA company running out of cash borrows or issues shares; both shrink existing holders' stake.
- Current RatioAt least 1 — current assets cover current liabilities
- Debt / EquityAt most 1; above 2 fails
- Cash RunwayPositive free cash flow or at least two years of cash
Price Strength
4 RulesThe market usually spots good companies through price first. A stock lagging its sector and the index is not just waiting its turn.
- Versus the MarketSix-month return not behind the S&P 500
- Versus Its SectorSix-month return not behind the sector fund
- Distance from 52-Week LowAt least 30% above the low
- Distance from 52-Week HighAt most 25% below the high
Ownership
3 RulesIf the share count keeps rising, value per share does not grow even when the company does. Interest from successful funds is a second confirmation.
- DilutionShare count up at most 2% a year
- Famous Fund InterestAmong tracked funds, adders not outnumbered by trimmers
- Insider ActivityNo heavy net selling over six months
Catalyst Signals
3 RulesThe direction of analyst views, the upside to target and the quality of the last report point indirectly at the reason behind growth.
- Analyst TrendShare of buy ratings rising over three months
- Upside to TargetAt least 10% to the average target
- Quality of the Last ReportEarnings analysis score of at least 60
The score averages the measurable rules with category weights: growth 30, price strength 20, profitability 15, health 15, ownership 10, catalysts 10. A pass counts in full, a caution half; rules we cannot measure stay out. A stock that hits an elimination rule is capped at 45. Growth above 300% counts as a base effect and is marked as a caution.
This is not investment advice; it is a research tool that measures fit with the rules.
How to Use It
2Measure
Growth, profitability, health and strength rules are marked pass, caution or fail; a rule we cannot measure stays out of the score.
3Research
The score is a starting point. Read the story, the valuation and the chart separately; the next steps list says where to begin.
4Wait
You do not have to catch every move. Waiting until a candidate clears the rules comfortably is a decision too.
Three Principles
A Fallen Stock Is Not Cheap
A stock at half its high usually fell for a reason. What the price used to be says nothing about its value today.
Passing a Screen Is Not a Reason to Buy
The rules find candidates worth researching. A decision needs the company, the valuation and the risk weighed separately.
Growth Needs a Reason
A new product, a contract, a management change or an industry shift: there should be a concrete reason behind the expectation.
To Understand This
