Our Rating and Valuation Methodology
How use Eyestock Rating?
How use valuation?
Securities with high Eyestock Rating consistently outperform the market
Annual portfolio return
eyestock
21.1%
S&P 500
13.7%
Portfolio return over 5 years
eyestock
+161%
S&P 500
+90%
What stocks are included in the eyestock portfolio?
Eyestock Rating
Valuation
Market cap
Benchmark outperformance
71%
Information ratio
0.81
Eyestock portfolio consists of an average of 20 US undervalued by Eyestock methodology stocks with high Eyestock Rating. Returns are based on historical performance (backtest method) from January 2019 to December 2023. The portfolio was rebalanced quarterly, and returns were calculated with an equal distribution of weights and taking into account the actual dates on which companies published new reports.
How is the Eyestock Rating calculated
Our methodology is based on the comprehensive analysis of 10 indicators of a company's financial metrics in each of the following areas: Profitability, Balance, Operating Efficiency and Stability
Profitability
Measures how efficiently a company can convert its operations and investments into profit.
Gross Margin
Net Profit Margin
Earnings quality
Solvency
Companies with low debt burden have higher growth potential and lower risk
Debt / Equity ratio
CFO / Debt ratio
Current ratio
Efficiency
The effectiveness with which a company manages its resources to produce goods and services.
ROE
ROIC
Stability
The ability to facilitate and enhance economic processes, manage risks, and absorb shocks.
Stability Ratio (2y)
Stability Ratio (5y)
* Weight of each indicator
Eyestock Rating Calculation Example: Microsoft (MSFT)
Each of the 10 indicators is evaluated against its respective benchmark, receiving a score based on its outperformance/underperformance of the benchmark. The company's overall rating is then determined by aggregating these weight adjusted scores.
MSFT
Microsoft Corp
MSFT
Microsoft Corp
Profitability
37
Solvency
28
Efficiency
33
Stability
26
Eyestock Rating
Net Profit Margin
139%
Earnings quality
154%
Gross Margin
162%
Total profitability
Financial
Value
Benchmark
Check
Net Profit Margin
36 %
Earnings quality
135 %
Gross Margin
69 %
Benchmarks
The Eyestock Rating is calculated based on the relative performance of each of the indicators vs its benchmark.
Benchmarks are calculated both based on our own statistical research as well as insights from other investors such as Warren Buffett, Benjamin Graham, and Peter Lynch.
Profitability
Gross Margin
40%
Net Profit Margin
20%
Earnings quality
100%
Solvency
Debt / Equity ratio
0.5
CFO / Debt ratio
1
Current ratio
1.5
Efficiency
ROE
20%
ROIC
20%
Stability
Stability Ratio (2y)
1.5
Stability Ratio (5y)
1
How to use Eyestock Rating
1
Simplified Ratings derived from complex data analysis
The Eyestock Rating of MSFT is above 100 based on the company's financial indicators outperforming their benchmarks. This makes it a viable investment idea.
MSFT
Microsoft Corp
123
/100
High score
Eyestock Rating
Status
Description
High - Above 100
Viable Investment
Moderate - 50 - 100
Somewhat Risky Investment
Low - Below 50
Extremely Risky Investment
2
Track the Historical Eyestock Rating
In this case, MSFT Eyestock Rating has consistently been above 100, unlike other mega-cap companies Coca-Cola and Disney.
3
Compare Eyestock Rating of peer companies vs an index
Eyestock Rating will not only save time on your market analysis, but will also increases your return on investments.
Microsoft
Coca-Cola
Disney
S&P 500
Microsoft -
Coca-Cola -
Disney -
S&P 500 -
Valuation
Our valuation process emphasizes the use of historical Price-to-Earnings (P/E) values. By evaluating historical P/E ratios, we place a company's current financial metrics within a broader historical context. This comprehensive approach allows us to identify potential investment opportunities by highlighting discrepancies between a stock's market price and its intrinsic value, informed by its historical performance and valuation trends.
The interactive chart below shows the historical valuation of a stock (GRMN)
Greatly Undervalued
If the current P/E is below its minimum historical value (green line), the stock is at the lowest capitalization to its net income ratio over the specified time period. Such an investment could have great potential.
The minimum value level on the charts is indicated by a green line. Pay attention to the periods at the beginning of 2020 and the end of 2022 when the price dropped or came very close to it. GRMN shares at these moments had the status of being greatly undervalued by Eyestock methodology, after which a powerful and confident price growth followed.
Current market price
Open:
High:
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Methodology Constraints
We are very careful about the quality of the data used in our methodology. We meticulously collect data from our official data vendor Finnhub LTD in order to calculate the company's rating as accurately and in detail as possible. But sometimes you may face that the company's rating is not available. This is due to contrains of the methodology or available data.
Eyestock Rating calculations exclude:
Banks
Insurance companies
REITs
Companies without any revenue
We do not calculate Eyestock Rating if:
Fewer than three years of public financial records available
The company's reporting frequency has changed
The data received from the supplier is incomplete
The company does not disclose the data necessary to calculate key indicators