Factor grades
Letter grades for each area of a company: quality, strength, growth, valuation, capital allocation, management, competitive position and risk.
Each is graded exactly like the investment score — metrics on fixed linear scales, a weighted mean, the same A+ to F steps. Capital allocation, management, competitive position and risk are kept OUT of the investment score: they inform a judgment a reader should make rather than settle it.
Inputs
- Capital allocation. ROIC, buyback yield, dividend growth, FCF conversion, capital intensity.
- Management. ROIC, margin trend, beat rate, 30-day estimate change, insider net buying, insider ownership (rewarded up to 12%, not beyond), earnings quality, 3-year revenue CAGR.
- Competitive position. Gross and operating margin, ROIC, gross profitability, margin durability, 5-year revenue CAGR, R&D intensity, scale in its sector.
- Risk. Beta, debt/equity, net debt/EBITDA, interest coverage, Altman Z, short interest, margin volatility, accounting risk, valuation risk. A HIGH grade means LOW risk.
How to read it
Same steps as the investment score, A+ from 0.90 down to F below 0.20. A factor with less than 45% of its metric weight on file shows no grade.
How to use it
Read the shape, not the average: strong quality with weak valuation is a good business at a full price; strong valuation with weak strength is a common value trap.
Limitations
The fixed scales suit a typical industrial or technology company; banks, insurers and utilities can grade poorly on measures that do not fit them, and several are withheld for banks.
In Kereon
Investing · company. The eight shown together. The investment score's other three categories — institutional confidence, stability and momentum — are graded the same way.
Prospects · Matchup. Two companies' grades side by side, never totaled.
Also called: category grades, eight factors, business quality, financial strength, capital allocation, management, competitive position, moat, health dashboard.