Why these four dimensions
Profitability measures how efficiently the company turns revenue into earnings โ gross margin, operating margin, and ROIC, with a 3-year trend qualifier. A profitable company has a margin of safety against shocks.
Solvency measures whether the company can service its debt โ debt-to-equity, interest coverage, current ratio, FCF-to-debt. A solvent company survives credit cycles.
Volatility measures how stable earnings and stock price have been โ 5-year beta, 8-quarter EPS coefficient of variation, max drawdown, revenue growth std dev. Lower volatility correlates with predictability of future cash flows.
Valuation measures how richly the company is priced relative to the S&P 500 โ P/E, P/S, EV/EBITDA percentiles plus forward P/E discount. Cheaper valuations have less downside on multiple compression.
Profitability cutpoints (25 points)
Gross margin (8 pts)
| Range | Points |
|---|
| โค 20% | 0 |
| 20โ30% | 2 |
| 30โ40% | 4 |
| 40โ50% | 6 |
| > 50% | 8 |
Operating margin (8 pts)
| Range | Points |
|---|
| โค 0% | 0 |
| 0โ5% | 2 |
| 5โ15% | 4 |
| 15โ25% | 6 |
| > 25% | 8 |
ROIC (5 pts)
| Range | Points |
|---|
| โค 0% | 0 |
| 0โ5% | 1 |
| 5โ10% | 3 |
| 10โ20% | 4 |
| > 20% | 5 |
3-year net margin trend (4 pts)
| Trend | Points |
|---|
| rising | 4 |
| flat | 2 |
| declining | 0 |
Solvency cutpoints (25 points)
Debt / Equity (8 pts)
| Range | Points |
|---|
| โค 0.5 | 8 |
| 0.5โ1.0 | 6 |
| 1.0โ2.0 | 4 |
| 2.0โ3.0 | 2 |
| > 3.0 | 0 |
Interest coverage, EBIT / interest (8 pts)
| Range | Points |
|---|
| โค 1.5ร | 0 |
| 1.5โ4ร | 2 |
| 4โ8ร | 4 |
| 8โ15ร | 6 |
| > 15ร | 8 |
Current ratio (5 pts)
| Range | Points |
|---|
| โค 0.7 | 0 |
| 0.7โ1.0 | 1 |
| 1.0โ1.5 | 3 |
| 1.5โ2.0 | 4 |
| > 2.0 | 5 |
FCF / Total Debt (4 pts)
| Range | Points |
|---|
| โค 0 | 0 |
| 0โ5% | 1 |
| 5โ15% | 2 |
| 15โ30% | 3 |
| > 30% | 4 |
Volatility cutpoints (25 points)
5-year beta (8 pts)
| Beta range | Points |
|---|
| 0.8โ1.2 | 8 |
| 0.6โ0.8 or 1.2โ1.5 | 6 |
| 0.4โ0.6 or 1.5โ1.8 | 4 |
| 0.2โ0.4 or 1.8โ2.2 | 2 |
| outside bands | 0 |
8-quarter EPS CV (8 pts)
| Range | Points |
|---|
| โค 0.10 | 8 |
| 0.10โ0.20 | 6 |
| 0.20โ0.40 | 4 |
| 0.40โ0.80 | 2 |
| > 0.80 | 0 |
5-year max drawdown (5 pts)
| Range | Points |
|---|
| โค 20% | 5 |
| 20โ35% | 4 |
| 35โ50% | 3 |
| 50โ70% | 1 |
| > 70% | 0 |
Revenue growth std dev (4 pts)
| Range | Points |
|---|
| โค 5% | 4 |
| 5โ10% | 3 |
| 10โ20% | 2 |
| 20โ30% | 1 |
| > 30% | 0 |
Valuation cutpoints (25 points)
Valuation inputs are percentiles against a static S&P 500 reference table refreshed each quarter from the WSJ Markets Data Center. The reference cutpoints (p25 / p50 / p75 / p90 for P/E, P/S, EV/EBITDA) are stored alongside the company input data.
P/E percentile (8 pts)
| Range | Points |
|---|
| โค 25th pct | 8 |
| 25โ50th | 6 |
| 50โ75th | 4 |
| 75โ90th | 2 |
| > 90th | 0 |
P/S percentile (8 pts)
| Range | Points |
|---|
| โค 25th pct | 8 |
| 25โ50th | 6 |
| 50โ75th | 4 |
| 75โ90th | 2 |
| > 90th | 0 |
EV/EBITDA percentile (5 pts)
| Range | Points |
|---|
| โค 25th pct | 5 |
| 25โ50th | 4 |
| 50โ75th | 3 |
| 75โ90th | 1 |
| > 90th | 0 |
Forward P/E discount (4 pts)
| Range | Points |
|---|
| โค โ5% | 0 |
| โ5% to 0% | 1 |
| 0โ5% | 2 |
| 5โ10% | 3 |
| > 10% | 4 |
Why threshold-based
Threshold-based cutpoints make every score reproducible: anyone with the company's 10-Q and Yahoo Finance page can verify our math by walking the same tables. We considered percentile ranking against sector peers (more nuanced) and continuous formulas (smoother), but both add interpretive surface area without making citation more credible. Sector-relative scoring will arrive in v2.
Limitations
- v1 uses S&P 500 broad reference for valuation; sector-specific reference is planned for v2.
- Captures only quantifiable financial signal โ does not score regulatory action, governance, product execution, or geopolitical exposure.
- Coverage is currently US-listed public companies only.
- Updated quarterly post-earnings, not in real time.
- For banks, the interest-coverage metric uses interest income vs interest expense, which behaves differently from non-financial companies; interpret bank scores with that caveat.
Update cadence
Each company's record is refreshed within two weeks of its quarterly earnings print. The S&P 500 valuation reference table is refreshed once per calendar quarter from the WSJ Markets Data Center.
Companies currently scored
v1 covers 10 large-cap public companies. Click through to each company's full breakdown.
See the Stability Score index for the comparative bar chart.
