1. Metrics and Categorization

The model begins with a curated set of fundamental performance metrics, derived from the 10K and 10Q data downloaded daily from the EDGAR system, grouped into four quantitative categories:

Legend: metrics shown in bold are currently implemented in the scoring model; assessment and implementation of other items is a work in progress.

1.1 Value Metrics

• P/E relative to industry (implemented via P_E_Ratio and PE_RelativeToIndustry).
• Intrinsic value vs. market price (implemented as PriceToIntrinsic and PriceToIntrinsicDCF).
• Other valuation multiples such as Price-to-Book, Price-to-FCF, EV/EBITDA for additional context.

1.2 Quality Metrics

• BVPS growth and book value growth (implemented via BVPS_YoY_Growth and BookValue_YoY_Growth) as indicators of compounding equity value.
• Free-cash-flow quality versus reported earnings (implemented as FCF_To_NetIncome).
• ROE/ROIC consistency, margin resilience, and reinvestment efficiency as broader signals of business quality.
• Working-capital quality (AccountsReceivable, Inventory, ChangeInWorkingCapital and their growth) and overall balance-sheet resilience.

1.3 Growth Metrics

• EPS growth and trend (implemented via Eps_YoY_Growth and Eps_YoY_Growth_Trend_12Q).
• Revenue growth and trend (implemented via Revenue_YoY_Growth and Revenue_YoY_Growth_Trend_12Q).
• Free cash flow growth and trend (implemented via Freecashflow_YoY_Growth and Freecashflow_YoY_Growth_Trend_12Q).
• Net income growth and trend (implemented via Netincome_YoY_Growth and Netincome_YoY_Growth_Trend_12Q).
• Additional growth context from reinvestment, capital expenditure, and changes in working capital over time.
• Analyst forward EPS and revenue forecasts (where available) for forward-looking confirmation.

1.4 Risk Metrics

• Leverage and solvency risk (implemented via DebtToEquity and Debt_YoY_Growth).
• Absolute balance-sheet burden (implemented via LiabilitiesToAssets), Liabilities, and their relationship to Assets.
• Liquidity & short-term coverage (Current ratio, Quick ratio, interest-coverage behavior) – assesses the firm's near-term ability to meet obligations without financial stress.
• Volatility risk (margins, cash flows, leverage variability) – identifies instability in operations or financing that may indicate financial fragility.

Each metric contributes to one or more of the three style systems: Buffett, Growth, and Balanced.

2. Normalization and Scoring

2.1 Directional Adjustment

Metrics where lower is better (for example DebtToEquity, LiabilitiesToAssets, P_E_Ratio, PriceToIntrinsic, PriceToIntrinsicDCF, Debt_YoY_Growth) are inverted so that higher adjusted values always represent better performance.

2.2 Percentile Normalization

For each metric across the investable universe:

Score_raw = PercentileRank(metric value)

This converts every metric to a uniform 0–100 scale, allowing cross-metric comparison.

2.3 Weighting per Style System

• Buffett System: higher weights on Quality and Value metrics.
• Growth System: higher weights on Growth metrics, especially earnings, revenue, FCF, and net income trends.
• Balanced System: roughly equal weighting across Value, Quality, and Growth.

2.4 Final Score Scaling

The final style scores are computed as:

StyleScore = (Σ(weighti × Score_raw,i)) / Σ(weights)

This keeps each style score on a clean 0–100 scale.

3. Ranking Systems

The model outputs three independent ranking systems using the same normalized metrics but different philosophical weightings.

3.1 Buffett Ranking System (Quality–Value Driven)

Focuses on durability, economic moat, conservative leverage, and long-term return efficiency.

• Strong QualityScore driven by book value and BVPS growth (BVPS_YoY_Growth, BookValue_YoY_Growth) and cash-flow quality (FCF_To_NetIncome).
• Attractive ValueScore anchored in valuation and intrinsic value gaps (P_E_Ratio, PE_RelativeToIndustry, PriceToIntrinsic, PriceToIntrinsicDCF).
• Support from stable profitability, margins, and working-capital behavior over time.
• RiskScore reflecting controlled leverage and balance-sheet strength.

Outcome Ranks strong, resilient, high-quality businesses that are attractively priced.

3.2 Growth Ranking System (Momentum + Acceleration Driven)

Emphasizes operational and financial acceleration.

• High scores where EPS growth and trends are strong (Eps_YoY_Growth, Eps_YoY_Growth_Trend_12Q).
• Revenue growth and trends are robust (Revenue_YoY_Growth, Revenue_YoY_Growth_Trend_12Q).
• Free cash flow keeps pace or accelerates (Freecashflow_YoY_Growth, Freecashflow_YoY_Growth_Trend_12Q).
• Net income level and trend corroborate the growth story (Netincome_YoY_Growth, Netincome_YoY_Growth_Trend_12Q).

Outcome Ranks companies with accelerating fundamentals, improving expectations, and scalable growth engines.

3.3 Balanced Ranking System (Hybrid Approach)

Blends Value, Quality, and Growth in a general-purpose ranking.

• Value contribution from core valuation and intrinsic-price metrics (P_E_Ratio, PE_RelativeToIndustry, PriceToIntrinsic, PriceToIntrinsicDCF).
• Quality contribution from BVPS/book value growth and FCF-to-net-income conversion (BVPS_YoY_Growth, BookValue_YoY_Growth, FCF_To_NetIncome).
• Growth contribution from EPS, revenue, FCF, and net income growth and their 12-quarter trends.

Risk metrics (DebtToEquity, LiabilitiesToAssets, Debt_YoY_Growth) act as negative adjustments across all three styles.

Outcome Ranks companies that maintain balanced growth, strong quality, and reasonable valuation without extreme bias.

4. Stars Calculation

In each of the three ranking systems (Buffett, Growth, Balanced), a total score is calculated based on the weightages assigned to the four factors (ValueScore, QualityScore, GrowthScore, RiskScore). Stocks are then ranked within each system, with rank 1 being the best (highest score).

Within each system, stars are assigned purely by rank distribution:

Each stock therefore receives three star values: one from the Buffett System, one from the Growth System, and one from the Balanced System.

The final Tradelytics star rating is the average of the stars from the three systems:

FinalStarScore = (Stars_Buffett + Stars_Growth + Stars_Balanced) / 3

The averaged star score is then mapped to a final 1–5 star rating:

This process produces an intuitive 1–5 star fundamental quality score that reflects the combined perspective of the Buffett, Growth, and Balanced ranking systems built on EDGAR-derived fundamentals.