The Eyestock Investment Grade

At Eyestock, our mission is to empower individual investors by providing clear, objective, and reliable financial evaluations. To help you make informed and balanced decisions, we provide an investment grade as a conclusion of our detailed research into all of a company's financial indicators and price metrics using the quantitative analysis method.

The grade is an integral metric regarding the prospects of investing in a company's shares, which takes into account both the analysis of the quality of the business and the assessment of the issuer's value without influencing each other.

For companies covered by Eyestock's quantitative analysis, “Attractive”, “Neutral” and “Avoid” grades are provided.

• Receive “High” fundamental rating of 100 or higher
• Have “Undervalued” / “Greatly Undervalued” status of stock valuation

• Has “High” rating but is “Overvalued”
• Has “Moderate” rating between 50 and 100 and is not “Greatly Overvalued”

• Has “High” or “Moderate” rating but is “Greatly Overvalued”
• Has “Low” rating of 50 and under

Detailed information about the Rating and Valuation can be found below.

Eyestock database has more than 7500 covered companies from 31 stock exchanges. We are not able to fully cover a company with our analysis in the following cases:

• A company is a bank, REIT or engaged in insurance
• A company has no recorded revenue
• Fewer than three years of financial reports are publicly available
• The reporting frequency of an issuer has changed from semi-annual to quarterly
• Financial data received from the data vendor is incomplete
• A company does not disclose the data necessary to calculate key components of rating

The Eyestock Ratings And Valuations

A comprehensive Eyestock quantitative analysis comprises two equal and independent parts: stock rating and valuation.

Video Tutorial: Rating And Valuation

Details About Eyestock Rating

The final assessment of the quality of a business is based on an analysis of 10 key financials taken from the company's statements. It serves as an answer to the question of whether the company is generally attractive for investment. The in-depth assessment covers such aspects as the profitability and solvency of the company, management efficiency, and growth sustainability.

We at Eyestock use a scoring system, and the final rating is the sum of 10 participating metrics points, taking into account the weight of each and the state relative to the standard (benchmark) we have set for an outstanding company.

Gross Margin

Gross profit divided by total revenue for the last 12 months (TTM).

The benchmark for an outstanding company is 40%.

Net Profit Margin

Net income divided by total revenue TTM.

The benchmark is 20%.

Earnings Quality

Cash flow from operating activities divided by net income TTM.

The benchmark is 100%.

Cash Flow to Debt ratio

Cash flow from operating activities TTM divided by average total debt for 12 months.

The benchmark is 1.

Current Ratio

Average current assets divided by average current liabilities.

The benchmark is 1,5.

Debt to Equity Ratio

Average total debt divided by average equity.

The benchmark is 0,5.

ROE

Net income TTM divided by average shareholder`s equity.

The benchmark is 20%.

ROIC

Net operating profit after taxes TTM divided by average invested capital.

The benchmark is 20%.

Stability Ratio Long-Term (5y)

Average net income`s growth rate for 5 years divided by standard deviation of growth rate.

The benchmark is 1.

Stability Ratio Short-Term (2y)

Average net income`s growth rate for 2 years divided by standard deviation of growth rate.

The benchmark is 1,5.

Cases

Historical Results

While there is no way to guarantee that what worked in the past will work equally well in the future, we still expect high-rated stocks to perform better over the long term than stocks with moderate or low ratings. As historical confirmation, we will provide price returns of the above-mentioned stocks with different ratings.

Note that what worked in the past is never guaranteed to work in the future. We assume that the trend will continue in the future, but you should never expect results identical to those that occurred historically.

Details About Eyestock Valuation

When the analysis of business indicators has been carried out and a stock for investment has been selected, it is necessary to find the optimal entry point in terms of current value. Eyestock's quantitative valuation approach is based on historical multipliers, namely the price-to-earnings ratio. 

To understand whether it is reasonable to buy a stock now, we need to understand whether it is relatively undervalued at the current time. If not, then determine the price level at which the company's value will be undervalued relative to the fair price.

To determine whether a company is undervalued, we compare its current value with its historical one over the previous five years (20 quarters). The Eyestock valuation approach is a three-step assessment model:

Calculations of the P/E Ratio meanings for the last 5 years

To do this we divide the company`s market cap taken from reliable data vendor`s source by net income for the last 12 months (TTM) as of the end date of each reporting period.

The median P/E meaning search

The median function helps to level out extreme deviations of the ratio over time and serves as a more reliable metric of the normal than the arithmetic mean

Getting a fair value level

Product of the P/E ratio median meaning and earnings per share (EPS) for the last 12 months

By analogy with fair value, we calculate the maximum and minimum ones by multiplying the corresponding extremums of the price-to-earnings ratio by EPS TTM.

Based on quantitative Eyestock analysis, we provide 4 valuation statuses for covered stocks:

Greatly Undervalued

Stock is trading below the minimum value level.

It means the current price may concern as a Low-Risk Entry Point.

Undervalued

Stock is trading below the fair value level but above the minimum one.

It means the current price may concern as a Moderate-Risk Entry Point.

Overvalued

Stock is trading above the fair value level but below the maximum one.

It means the current price may concern as a Risk Entry Point.

Greatly Overvalued

Stock is trading above the maximum value level.

It means the current price may concern as a High-Risk Entry Point.

Moreover, such a condition can be a signal to reduce the position.

If the fair level can be considered as an effective entry point for long-term investors to start investing in a particular stock, then the minimum can be used to add to a position while the maximum - to reduce it.

How To Use

The main strategy offered by Eyestock is to buy shares when they are at fair value or below and reduce the position when the price reaches the maximum valuation level.

Using the given example of Snap-On Inc shares, a backtest of such a strategy would allow for a 50% return, while the company`s market cap increased by only 20%.

Note that what worked in the past is never guaranteed to work in the future. We assume that the trend will continue in the future, but you should never expect results identical to those that occurred historically.

Stock Screener

At Eyestock, our mission is to empower individual investors by providing clear, objective, and reliable financial evaluations. By using stock screener, you can make informed decisions that lead to high-quality investments and help you achieve your financial goals.

Video Tutorial: Screener

How To Use

Such filters as market cap, sector, industry, country, currency, or exchange help you focus your search on stocks that match your investing universe.

Activate the «Undervalued» option to get a list of stocks that are trading below their fair price. If you choose "Greatly undervalued", you will discover companies that are valued at their 5-year lows.

Thanks to stock ratings, you can quickly ensure that the companies you choose have strong fundamentals. We suggest clicking «High» in the Rating filter to deal with viable investment ideas.Thanks to stock ratings, you can quickly ensure that the companies you choose have strong fundamentals. We suggest clicking «High» in the Rating filter to deal with viable investment ideas.

If you require a more accurate result, customize any of our screener's 50 financial indicators using «All filters» button to suit your needs if you have a ready-made set of preferences for finding the best stocks.

The option «Edit columns» allows you to customize the final view of the results table at your preference if you want to see additional parameters of the selected stocks.

By saving your selection, you save time in the future checking to see if new stocks have appeared that meet your specific set of requirements.

Add the favorite stock you have chosen to your Watchlist to track any changes in ratings, valuation and prices.

Watchlist

The Watchlist was created to make it easy to track updates on your favorite stocks or stocks that were previously selected in the screener.

Video Tutorial: Watchlist

How To Use

Create the list for tracking by giving it a name.

Adding shares to the watch list is possible from the company card or screener and directly within the Watchlist functionality. Start typing the name or the ticker and click the “heart” button.

Adding favorite shares to your list to watch automatically sets notifications. A new report, Eyestock rating update or valuation change will not be missed. Every day you will receive an email with a list of events that are relevant to you, along with alerts within the service.

You can customize notifications to your preferences by adding alerts for reaching a specific price level.

Now you have a customized tool for tracking stock prices and changes in financial indicators in the form of Eyestock rating. Check your stocks in one place whenever necessary.

Portfolio Optimizer

If you got to the point of portfolio investing by selecting the best stocks and adding them at the best prices, the Eyestock portfolio analyzer will help you make it optimal. The optimization process is based on historical data analysis and should not be construed as portfolio advice.

Video Tutorial: Portfolio

How To Use

Adding shares to the portfolio is possible from the list to watch as well as directly through the search. Start typing the name or the ticker and click the «plus» button.

Set the current weight for each stock in the portfolio. The «Align weights» option is available in additional features and will allow you to equally distribute your portfolio among the added stocks.

After capital allocation is completed, portfolio metrics for analysis will be calculated automatically if at least 3 stocks are added to the portfolio.

7 key metrics for analyzing your portfolio are available at Eyestock. An ideal portfolio should satisfy you on all points of the test.

Average annual return

The geometric mean return of a portfolio for a selected period or return taking into account reinvestment of profits in the next period.

Please remember that this value is based on 5 years of historical data and does not guarantee future results.

Risk

A measure of risk is the standard deviation of a portfolio's return. Its value means by how much the portfolio's return may differ from the average level. The higher the standard deviation, the higher the risk of not achieving the average expected return.

The return of a quality portfolio must at least exceed its risk.

Sharpe Ratio

The Sharpe ratio measures the performance of a portfolio. A value less than 0 indicates the insolvency of the portfolio in the current economic conditions. The higher the value of the coefficient, the higher the efficiency of your portfolio. A ratio greater than 1 usually means the portfolio is extremely efficient.

Reliability

The probability of achieving the minimum required return is calculated based on the Roy Safety Ratio (SF Ratio).

Drawdown

This value is the maximum loss value of the portfolio for a given period of time with a probability of 95%.

Information Ratio

IR is a measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns. Higher information ratios indicate a desired level of consistency, whereas low information ratios indicate the opposite.

Jensen`s Alpha

Alpha reflects a portfolio's return relative to its expected return. If the value is less than 0, then the portfolio is less efficient than the market. The higher the ratio, the greater the added value from investing in the current portfolio. Typically used to select a manager or fund, but can also be applied to an individual portfolio of assets.

Once you have analyzed your portfolio across all metrics and have come to the conclusion that you want to improve it, you can use the “Optimize weights” feature.It will go through all possible portfolio alternatives given the minimum and maximum weight of each stock and show the best allocation based on Sharpe Ratio maximization.

Now you have an improved portfolio in terms of its theoretical performance. Check all the metrics and evaluate their change relative to the base case. Changes are indicated for each metric after its value.