Wednesday, November 28, 2012

Tom's quality ranking system

Quality is a ranking system developed by the website, they describe it as follows:

Factors used in the Quality ranking system:
Profit Margins - 25% of total
Trailing 12 month Operating Margin (75% of this category)
5-year Average Operating Margin (25% of this category)
Turnover - 25% of total
Trailing 12 month Asset Turnover (100% of this category)
Returns on Capital - 25% of total
Trailing 12 Month Return on Investment (30% of this category)
5-year Average Return on Investment (40% of this category)
Trailing 12 Month Return on Equity (10% of this category)
5-year Average Return on Equity (20% of this category)
Finances - 25% of total
Current Ratio in latest quarter (30% of this category)
Ratio of Debt to Capital in latest quarter (25% of this category)
Trailing 12 month Interest Coverage ratio(45% of this category)

To me its a shorthand way of bringing in the fact that investors will study their stocks and try to weed out those with problems.

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