Calculation Guidance 6 – Score

The maximum score a stock can achieve within Tykr is 20.

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.

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

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.

The maximum points = 6.

If ROIC is equal or greater than 10%, apply 1 point.
Calculation = ebita / (debt + equity)

If ROIC 1 Year Past is equal or greater than 10%, apply 1 point.
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 1 point.
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 1 point.
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 1 point.
Calculation = ebita 4 years past / (debt 4 years past + equity 4 years past)

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.

The maximum points = 3.

If Equity Growth Rate over the past year is equal or greater than 10%, apply 1 point.
Calculation: (equity/equity1y)^(1/1)-1

If Equity Growth Rate over the past 4 years is equal or greater than 10%, apply 1 point.
Calculation: (equity/equity4y)^(1/4)-1

If Equity Growth Rate over the past year is greater than Equity Growth Rate over the past 4 years, apply 1 point.

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.

The maximum points = 3.

If EPS Growth Rate over the past year is equal or greater than 10%, apply 1 point.
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 1 point.
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 1 point.

Sales Growth Rate:  Sales represents the revenue of the company. The higher the score, the more the company is increasing it’s revenue year over year.

The maximum points = 3.

If Sales Growth Rate over the past year is equal or greater than 10%, apply 1 point.
Calculation: (sales/sales1y)^(1/1)-1

If Sales Growth Rate over the past 4 years is equal or greater than 10%, apply 1 point.
Calculation: (sales/sales4y)^(1/4)-1

If Sales Growth Rate over the past year is greater than Sales Growth Rate over the past 4 years, apply 1 point.

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.

The maximum points = 3.

If Cash Growth Rate over the past year is equal or greater than 10%, apply 1 point.
Calculation: (cash/cash1y)^(1/1)-1

If Cash Growth Rate over the past 4 years is equal or greater than 10%, apply 1 point.
Calculation: (cash/cash4y)^(1/4)-1

If Cash Growth Rate over the past year is greater than Cash Growth Rate over the past 4 years, apply 1 point.

Payback Time:  Payback Time is the estimated time it will take for the stock to double. This is calculated based on the growth rate of the stock price. This number should NOT be taken literally. Payback Time should be used as a comparing tool against other stocks. For example a stock with a Payback Time of 3 years will most likely double faster than a stock with a Payback Time of 7 years. Important Note: If the Payback Time is 0 or a negative number, that means the stock is under performing.

If Payback Time is less than 10 years, apply 1 point.

Calculation: IF(TRUE,LN(-(share_price/eps+1)*(1-(1+eps_gr_4y))+1)/LN(1+eps_gr_4y)-1,LN(-(share_price/eps+1)))

Where…

shareprice = current share price
eps = current eps
eps_gr_4y = Annualized EPS growth rate over 4 years

MOS (Margin of Safety):  The higher the MOS the higher potential returns you will make. MOS is the difference between the Share Price and Sticker Price where Sticker Price is the real value of the stock.

If MOS is equal or greater than 50%, apply 1 point.

Calculation: 100%-(Share Price/Sticker Price)

Maximum Score = 20

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