How we calculate the three indicators

Three different questions

Fundamentals looks at the business: what it earns, whether it grows, how solid it is. Valuation looks at the price: what you pay against what the business produces. Technical looks at the chart: where the price is heading now. A good company can be expensive, and a cheap one can be cheap for a reason, so none of the three replaces another.

Fundamentals

The average of three pillars: quality, growth, health and risk. Each one gathers several figures from the company accounts.

The score is absolute, not a position against sector neighbours: 60 out of 100 means the same thing at a bank as at a software company. A weak business in a weak sector is still a weak business, and comparing it with its neighbours would have made it look fine.

Price does not enter here, because Valuation covers it. Nor does the dividend: paying one is a decision about splitting the profit, not a measure of the business.

Being an average of three pillars, the score rarely reaches the ends of the scale. Below 30 or above 85 happens only when all three point the same way.

Valuation

Between four and ten price measures, each shown as a position within the company sector: 100 is the cheapest in the sector, 0 the dearest. Here the sector comparison earns its place, because a multiple does not read the same at a bank as at a factory.

The measures are gathered into four families, and the average is taken within a family first. The reason is practical: several of them say the same thing in different words, and without families that one idea would have counted as many times as it appears.

Below the figure you also find what the business produces a year against the interest on a government bond. It is an observation, not a verdict: it says what the company earns against what the state pays, and nothing more.

Technical

Fifteen signals read off the share price chart, each with its usual threshold and a middle zone where it says nothing. Nothing is compared with anyone here: everything is judged on the chart itself.

As in Valuation, the signals are gathered into six families, so that three indicators measuring the same thing cast one vote rather than three. You can see all fifteen on the card, each with its value.

ADX does not enter the score, it qualifies it. The signals may all point the same way, but if ADX is low it means the price is going nowhere, and the card says so next to the figure.

When we give no figure

A score drawn from two figures looks on screen exactly like one drawn from fourteen. At a company that has just listed, or one with thin accounts, that would be a confidence the data does not support, so we prefer to say plainly that we cannot.

Fundamentals needs at least two pillars out of three. Valuation needs at least three measures, from two different families. Technical needs at least two hundred trading sessions, because below that the two hundred day average cannot even be worked out.

The card stays on the page, with the dial unlit and the reason written where the figure would be. When only a few inputs are missing, we tell you how many the figure was worked out on.