METHODOLOGY
How We Score Company Quality
The FPI Rating distills six fundamental factors, the Piotroski F-Score, and the Altman Z-Score into a single number from 0 to 10 — accompanied by a plain-English verdict.
WHY ONE NUMBER?
From Dozens of Metrics to One Answer
Most stock analysis platforms present investors with dozens of financial metrics scattered across multiple screens. Profitability ratios, debt ratios, growth metrics, valuation multiples — each tells part of the story, but the investor is left to synthesize everything into a single conclusion: is this a good company?
The FPI Rating does this synthesis automatically. It combines six dimensions of company quality into one number on a 0 to 10 scale. A quick glance tells you whether the company is fundamentally strong, average, or weak. The accompanying verdict explains why in one sentence.
THE SIX FACTORS
Six Dimensions of Company Quality
Measures how effectively a company converts revenue into profit. Based on gross margin, operating margin, net margin, and free cash flow margin. Companies with high profitability scores generate substantial profit at every level of the income statement.
Measures how efficiently a company uses its capital to generate returns. Based on return on invested capital (ROIC), return on equity (ROE), return on assets (ROA), and asset turnover. A company that consistently earns a high ROIC is creating real economic value.
Measures whether the company is expanding its earning power over time. Based on revenue growth, earnings per share growth, free cash flow growth, and book value growth. Growth confirms the business is not just profitable today but building value for the future.
Measures the company's financial leverage and ability to service obligations. Based on debt-to-equity, net debt to EBITDA, interest coverage, current ratio, and debt-to-assets. The score rewards companies that maintain prudent leverage with ample capacity to cover interest payments.
Measures how predictable the company's financial performance is. Based on beta, revenue volatility, EPS volatility, and consecutive profitable years. Stable companies are easier to value because their future cash flows are more predictable.
Measures whether the stock is priced attractively relative to fundamentals. Based on EV/EBITDA, P/E ratio, price-to-free-cash-flow, PEG ratio, price-to-sales, and price-to-book. This factor changes daily as the stock price moves — a great company can score low on valuation if the market has pushed the price too high.
GRADING SYSTEM
Each Factor Gets a Grade
Each of the six factors is scored 0 to 100 and assigned a letter grade that determines how it contributes to the verdict.
A
67–100 · STRONG
B
34–66 · MODERATE
C
0–33 · WEAK
ADDITIONAL CHECKS
Piotroski F-Score and Altman Z-Score
A 9-point scoring system developed by accounting professor Joseph Piotroski that evaluates financial strength through nine binary tests covering profitability, leverage, and operating efficiency. Academic research shows stocks with high F-Scores tend to outperform, particularly among value stocks.
7–9
Strong · +0.5 bonus
5–6
Moderate · +0.2
0–4
Weak · up to −0.5
A formula developed by Professor Edward Altman that predicts the likelihood of bankruptcy within two years. It combines five financial ratios into a single number. The FPI Rating uses it as a safety check — companies in the distress zone receive a penalty regardless of other scores.
>3.0
Safe · +0.3 bonus
1.8–3.0
Gray zone · no change
<1.8
Distress · −0.5 penalty
THE FORMULA
How It All Comes Together
FPI RATING CALCULATION
Step 1: Average all six factor scores (each 0–100)
Step 2: Divide by 10 to normalize to a 0–10 scale
Step 3: Apply Piotroski adjustment (−0.5 to +0.5)
Step 4: Apply Altman safety check (−0.5 to +0.3)
Step 5: Clamp to 0–10 range, round to one decimal
The result is a single number that reflects both the company's fundamental quality across six dimensions and its financial health as validated by two independent academic models.
THE VERDICT
One Sentence That Explains the Score
Every FPI Rating comes with a dynamically generated verdict — a single sentence that highlights the company's key strengths (factors graded A) and weaknesses (factors graded C). This is not a template. Each verdict is built from the actual data of each specific company.
RATING SCALE
How to Read the Score
Excellent
Strong across most or all fundamental factors
Good
Solid fundamentals with some areas of weakness
Average
Mixed profile with notable strengths and weaknesses
Below average
Significant fundamental weaknesses
Weak
Poor fundamentals across most factors
RATING VS FAIR VALUE
Two Different Questions
The FPI Rating and the fair value estimate answer two fundamentally different questions. The FPI Rating asks: is this a good company? The fair value estimate asks: is this stock a good price?
A company can score 8.5 out of 10 (excellent business) while trading 30 percent above fair value (expensive stock). The most attractive investment opportunities combine both: a high FPI Rating trading at or below fair value with a meaningful margin of safety.
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STOCKS RATED
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UPDATES
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DATA INPUTS
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Disclaimer: The FPI Rating is analytical data based on quantitative financial models. It does not constitute investment advice or a recommendation to buy or sell any security. Always conduct your own research and consult a qualified financial advisor before making investment decisions.