Calculation Guidance 6 – Score

The maximum score a stock can achieve within Tykr is 100.

Most investors, if they are able to calculate the MOS, will make a buying decision (or selling decision) based on MOS alone. That may work in some cases but an investor needs to add an extra layer of rigor to the analysis.  In other words, an extra layer of risk protection to truly confirm the stock is a wise or poor investment. That’s where the Tykr score comes in.

What Does a Tykr Score Mean?

The score within Tykr determines the overall financial strength of a stock. The higher the score, the safer the investment.

How does a stock achieve a Tykr score?

Here is how the points are achieved.

ROIC: Return on invested capital (ROIC) is used to determine a company’s efficiency at allocating capital to profitable investments. The higher the score, the more effective a company is using its capital to generate returns.

Maximum points = 30

• If ROIC is equal or greater than 10%, apply 5 points.
  • Calculation = ebita / (debt + equity)
• If ROIC 1 Year Past is equal or greater than 10%, apply 5 points.
  • Calculation = ebita 1 year past / (debt 1 year past + equity 1 year past)
• If ROIC 2 Year Past is equal or greater than 10%, apply 5 points.
  • Calculation = ebita 2 years past / (debt 2 years past + equity 2 years past)
• If ROIC 3 Year Past is equal or greater than 10%, apply 5 points.
  • Calculation = ebita 3 years past / (debt 3 years past + equity 3 years past)
• If ROIC 4 Year Past is equal or greater than 10%, apply 5 points.
  • Calculation = ebita 4 years past / (debt 4 years past + equity 4 years past)
• If ROIC over the past year is greater than ROIC over the past 4 years, apply 5 points.

Equity Growth Rate: Equity represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off. The higher the score, the more the company is growing it’s equity year over year.

Maximum points = 15

• If Equity Growth Rate over the past year is equal or greater than 10%, apply 5 points.
  • Calculation: (equity/equity1y)^(1/1)-1
  • Where equity1y is the total growth rate over 1 year.
• If Equity Growth Rate over the past 4 years is equal or greater than 10%, apply 5 points.
  • Calculation: (equity/equity4y)^(1/4)-1
  • Where equity4y is the total growth rate over 4 years.
• If Equity Growth Rate over the past year is greater than Equity Growth Rate over the past 4 years, apply 5 points.

EPS Growth Rate: The higher the EPS, the more profitable a company is considered. The higher the score, the more the company is increasing it’s EPS year over year.

Maximum points = 15

• If EPS Growth Rate over the past year is equal or greater than 10%, apply 5 points.
  • Calculation: (1+epsactual1y)^(1/1)-1
  • Where epsactual1y is the total growth rate over 1 year.
• If EPS Growth Rate over the past 4 years is equal or greater than 10%, apply 5 points.
  • Calculation: (1+epsactual4y)^(1/4)-1
  • Where epsactual4y is the total growth rate over 4 years.
• If EPS Growth Rate over the past year is greater than EPS Growth Rate over the past 4 years, apply 5 points.

Sales Growth Rate: Sales represent the revenue of the company. The higher the score, the more the company is increasing its revenue year over year.

Maximum points = 15

• If Sales Growth Rate over the past year is equal or greater than 10%, apply 5 points.
  • Calculation: (sales/sales1y)^(1/1)-1
  • Where sales1y is the total growth rate over 1 year.
• If Sales Growth Rate over the past 4 years is equal or greater than 10%, apply 5 points.
  • Calculation: (sales/sales4y)^(1/4)-1
  • Where sales4y is the total growth rate over 4 years.
• If Sales Growth Rate over the past year is greater than Sales Growth Rate over the past 4 years, apply 5 points.

Cash Growth Rate: Cash is the cash that a business has available. A business with more cash available is going to be better prepared for economic downturns. The higher the score, the more the company is increasing it’s available cash year over year.

Maximum points = 15

• • If Cash Growth Rate over the past year is equal or greater than 10%, apply 5 points.
    • Calculation: (cash/cash1y)^(1/1)-1
    • Where cash1y is the total growth rate over 1 year.
  • If Cash Growth Rate over the past 4 years is equal or greater than 10%, apply 5 points.
    • Calculation: (cash/cash4y)^(1/4)-1

• Where cash4y is the total growth rate over 4 years.

• If Cash Growth Rate over the past year is greater than Cash Growth Rate over the past 4 years, apply 5 points.

Calculation Overview

• ROIC maximum = 30 points
• Equity maximum = 15 points
• EPS maximum = 15 points
• Sales maximum = 15 points
• Cash maximum = 15 points
• Total points = 90

Since the maximum points total 90, we then apply a percentage. For example, let’s say MSFT (Microsoft) totals 85 points. 85/90 = 94%.

We then convert the percent back to points.

94% = 94 points. 

In this circumstance, the score for MSFT in Tykr will display as 94/100.