This is a help page about the Pro Rating System. Click here to view a Y-Rating »
Historical Predictive Power: Moderate
How it relates to returns: See individual components - Value Score, Fundamental Score, and Valuation from Historical Multiples.
How to use it: In a glance, it will give you a sense of the safety and return possibility of the stock.
Watch out for: It will often miss stocks with a huge potential for gains because big gains are correlated with high risk. Also, it sometimes misses the decline of industries which were profitable for long periods of time.
Detailed Calculation: Once we have the Value Score, the Fundamental Score and the Valuation from Historical Multiples, we calculate the final score.
To receive an overall “Attractive” rating, a stock must:
- Receive a Value Score of 9 or 10
- Receive a Fundamental Score of 7 or higher
- Have a Historical Value greater than its current price
To receive an overall “Avoid” rating, a stock only needs to have “Weak” fundamentals - a Fundamental Score of 4 or lower.
We rate all other companies “Neutral,” since based on our testing we do not have strong quantitatively-backed reason to believe that they will underperform or outperform the market significantly as part of a portfolio.
Now you have an understanding of the key pro metrics. You can use them to evaluate any company.
To keep learning about what Pro has to offer, check out the description of our strategies.