How the Final Score is Calculated
You've learned about all four pillars. Now let's see how they combine into the Final Score.
The Final Score Formula
Final Score = Weighted Average of:
• Valuation Score (is it cheap?)
• Quality Score (is it good?)
• Growth Score (is it growing?)
• Health Score (is it stable?)
Each pillar contributes to the overall assessment, creating one number that summarizes the investment opportunity.
The Job Candidate
When hiring, you evaluate candidates on multiple dimensions:
- Skills (Quality)
- Salary expectations (Valuation)
- Career trajectory (Growth)
- Reliability (Health)
No single factor determines the hire. You weigh them all to make a decision.
The Final Score does the same for stocks—weighing multiple factors into one assessment.
Pillar Weights
While exact weights are proprietary, the general approach:
| Pillar | Relative Weight | Why |
|---|---|---|
| Valuation | High | Price matters—overpaying hurts returns |
| Quality | High | Business fundamentals drive long-term success |
| Growth | Medium | Expansion potential adds value |
| Health | Medium | Stability ensures survival |
Note: Weights may adjust based on market conditions and sector.
The Calculation Process
Step 1: Calculate Individual Scores
Each pillar score (0-100) is calculated separately using sector-relative comparisons.
Step 2: Apply Weights
Scores are weighted by importance:
Weighted Score = (V × w1) + (Q × w2) + (G × w3) + (H × w4)
Step 3: Normalize
The result is scaled to 0-100 for easy interpretation.
Step 4: Apply Adjustments
Special factors may adjust the score:
- Extreme values in any pillar
- Sector-specific considerations
- Risk flags
Key Takeaways
- Final Score combines all four pillar scores
- Valuation and Quality typically weighted highest
- Score is normalized to 0-100 scale
- Higher = more attractive investment opportunity
Interpreting the Final Score
| Score Range | Interpretation | Typical Action |
|---|---|---|
| 80-100 | Excellent opportunity | Strong buy candidate |
| 70-79 | Very good | Worth serious consideration |
| 60-69 | Good | Investigate further |
| 50-59 | Average | Hold if owned, maybe pass |
| 40-49 | Below average | Proceed with caution |
| Below 40 | Poor | Generally avoid |
Score Distribution
In a typical market:
- ~5% of stocks score 80+
- ~15% score 70-79
- ~30% score 50-69
- ~35% score 30-49
- ~15% score below 30
High scores are rare by design—they represent the best opportunities.
Scores Change Daily
As stock prices move and new financial data is released, scores update. A stock scoring 75 today might score 70 or 80 tomorrow.
This is a feature, not a bug—it reflects changing market conditions.
What the Final Score Captures
✅ Included:
- Relative valuation vs. sector
- Business quality metrics
- Growth trends
- Financial stability
- Sector context
❌ Not Included:
- Future events (earnings surprises, acquisitions)
- Qualitative factors (management quality, culture)
- Macro factors (interest rates, recession risk)
- Technical analysis (chart patterns)
Example Calculation
Stock XYZ:
| Pillar | Score | Weight | Contribution |
|---|---|---|---|
| Valuation | 72 | 30% | 21.6 |
| Quality | 68 | 30% | 20.4 |
| Growth | 55 | 20% | 11.0 |
| Health | 78 | 20% | 15.6 |
| Final Score | 68.6 → 69 |
This stock scores well on valuation and health, average on growth, and good on quality. Overall: a solid opportunity.
Final Score Traps
- Treating the score as a guarantee (it's a probability, not certainty)
- Ignoring individual pillar scores (the breakdown matters)
- Chasing the highest scores without research
- Not understanding why a score is high or low
Next up: What do BUY, HOLD, and SELL signals actually mean?