How ShareValue Calculates These Scores
Let's see how we combine growth and health metrics into actionable scores.
The Growth Score
Our Growth Score (0-100) evaluates expansion potential:
Growth Score = Weighted Average of:
• Revenue Growth Rate (3-year)
• Earnings Growth Rate (3-year)
• Growth Consistency
• Forward Growth Estimates
• Comparison to Sector Peers
Growth Score Components
| Component | What We Measure | Weight |
|---|---|---|
| Revenue Growth | 3-year CAGR | High |
| Earnings Growth | 3-year CAGR | High |
| Consistency | Stability of growth | Medium |
| Acceleration | Is growth speeding up? | Medium |
| vs. Sector | Relative to peers | High |
Interpreting Growth Score
| Score | Interpretation |
|---|---|
| 80-100 | Exceptional growth vs. peers |
| 60-79 | Above-average growth |
| 40-59 | Average growth for sector |
| 20-39 | Below-average growth |
| 0-19 | Declining or stagnant |
The Health Score
Our Health Score (0-100) evaluates financial stability:
Health Score = Weighted Average of:
• Debt-to-Equity Ratio
• Interest Coverage
• Current Ratio
• Free Cash Flow
• Cash Position
Health Score Components
| Component | What We Measure | Weight |
|---|---|---|
| Debt Level | D/E vs. sector | High |
| Interest Coverage | Ability to pay interest | High |
| Liquidity | Current/Quick ratios | Medium |
| Cash Flow | FCF generation | High |
| Cash Position | Cash on hand | Medium |
Interpreting Health Score
| Score | Interpretation |
|---|---|
| 80-100 | Fortress balance sheet |
| 60-79 | Healthy financials |
| 40-59 | Adequate stability |
| 20-39 | Some concerns |
| 0-19 | Significant risk |
Key Takeaways
- Growth Score measures expansion (revenue + earnings growth)
- Health Score measures stability (debt + liquidity + cash flow)
- Both are compared within sectors for fair evaluation
- Higher scores = better growth/health relative to peers
How They Work Together
The Four Quadrants
| High Health | Low Health | |
|---|---|---|
| High Growth | 🟢 Ideal—growing safely | Risky growth |
| Low Growth | 🟡 Stable but boring | 🔴 Troubled |
Best investments: High Growth + High Health
Avoid: Low Growth + Low Health
Example Analysis
Company A (Tech):
- Revenue Growth: 22% (sector avg: 15%)
- Earnings Growth: 28% (sector avg: 12%)
- D/E: 0.2 (sector avg: 0.5)
- Interest Coverage: 25x
- Growth Score: 78 | Health Score: 85
Company B (Tech):
- Revenue Growth: 8% (sector avg: 15%)
- Earnings Growth: 5% (sector avg: 12%)
- D/E: 1.5 (sector avg: 0.5)
- Interest Coverage: 3x
- Growth Score: 32 | Health Score: 28
Company A is clearly superior on both dimensions.
Sector Adjustment
We compare within sectors because:
- Tech companies naturally grow faster than utilities
- Banks naturally have higher leverage than software companies
- What's "healthy" varies by industry
A Growth Score of 60 means "above average for THIS sector."
Combining All Four Pillars
The Final Score brings everything together:
Final Score = Weighted Combination of:
• Valuation Score (is it cheap?)
• Quality Score (is it good?)
• Growth Score (is it growing?)
• Health Score (is it stable?)
The Ideal Stock
| Pillar | Target Score | What It Means |
|---|---|---|
| Valuation | 70+ | Undervalued |
| Quality | 70+ | Great business |
| Growth | 60+ | Expanding |
| Health | 60+ | Stable |
Finding stocks that score well on ALL four pillars is rare—but that's what makes them valuable.
Limitations
Growth Score Caveats
- Past growth doesn't guarantee future growth
- High growth can slow suddenly
- Growth quality matters (organic vs. acquired)
Health Score Caveats
- Healthy companies can still fail
- Some industries naturally have more leverage
- Cash hoarding isn't always good (could invest it)
Score Interpretation Traps
- Assuming high scores guarantee success
- Ignoring low scores on one pillar because others are high
- Not understanding why a score is high or low
- Comparing scores across different sectors
Using the Scores Together
Screening approach:
- Filter for Valuation Score > 60
- Filter for Quality Score > 60
- Filter for Growth Score > 50
- Filter for Health Score > 50
- Research the remaining candidates
This narrows 5,000+ stocks to a manageable list of quality opportunities.
Congratulations! You've completed Module 7: Growth & Health Scores. You now understand how we measure expansion and stability.
Next Module: The Final Score & Signals—putting it all together.