Skip to content

Our Methodology

We believe research should be transparent. Here is exactly how the ratings, projections, and comparisons on The Stocks School are calculated — and, just as importantly, what they can and can't tell you.

The investment rating (0–100)

Every stock with enough fundamentals data gets a single, transparent score from 0 to 100, computed by the same model for all of them — never hand-picked. Stocks whose ratios aren't loaded yet are shown as not rated instead of getting a guessed score. The score weighs four pillars of real fundamental data:

  • Growth. Revenue and earnings growth — is the business getting bigger?
  • Profitability. Margins and returns on capital (ROE, ROIC) — how efficiently it turns sales into profit.
  • Financial health. Debt levels, interest coverage, and liquidity — can it weather a downturn?
  • Valuation. P/E, P/S, and related multiples — are you paying a fair price for that quality?

The result maps to a label: Strong, Favorable, Neutral, or Weak. The same scoring drives the screener, scanner, and stock pages, so a rating means the same thing everywhere.

What the rating is not: it is a research starting point, not a buy or sell signal and not financial advice. A high score doesn't mean “buy,” and a low score doesn't mean “sell” — it means “look closer, here's why.”

The DCF fair value estimate

The discounted cash flow (DCF) card estimates what a business is worth from the cash it generates. It starts from the latest annual free cash flow in the company's SEC filings: operating cash flow minus capital expenditures. That cash flow grows at the company's trailing revenue growth rate, held between −5% and 20% a year (4% when no growth figure is available), for five years. Growth then fades in a straight line to 2.5% by year ten and stays at 2.5% after that. Every year is discounted at 9%, and the total is divided by the shares outstanding reported in the filings to give a per-share estimate.

A company with negative free cash flow gets no DCF, because there is no cash flow to compound. Small changes to the growth or discount rate move the result a lot, so treat it as one reference point, not a price target.

The 5-year projection model

Our projection is a scenario model: it grows revenue at an assumed rate, applies a profit margin, and multiplies by a valuation to show a resulting share-price range over five years. The assumptions are visible and editable — it's a tool for thinking through “what if,” not a forecast or a price target we stand behind.

It starts from the latest annual revenue in SEC filings. The default assumptions are:

  • Growth: the trailing revenue growth rate, held between 3% and 45% a year. The Bull case uses 1.35 times that rate and the Bear case 0.55 times.
  • Net margin: the latest annual net margin, held between 3% and 50%. A company that loses money is therefore modeled with a small profit.
  • P/E range: built from today's P/E: 60% to 100% of it in the Base case, higher in the Bull case and lower in the Bear case.
  • Shares: market cap divided by price, so American depositary receipts (ADRs) are valued per ADR. When no market cap is available, the shares outstanding reported in SEC filings are used.

When a stock has no growth, margin or P/E data, the model starts from placeholder values and the stock page says so. Its biggest weakness is that it carries a recent growth rate forward for five years. Few companies keep up a very high growth rate for that long, so the Base and Bull results for fast growers can look extreme. Treat those as a test of what the price already assumes, not as an expected outcome.

Technical analysis & peer comparison

Technical indicators (moving averages, RSI, support and resistance) are calculated directly from real price history and shown for educational context. Peer comparison ranks a stock against the other companies in its sector using the median of each metric, so you can see whether it's cheaper, more profitable, or faster-growing than its peers.

Limitations & honesty

Every model simplifies reality. Ratios miss qualitative factors like management quality, competitive shifts, and regulation. Data can be delayed or contain errors, and past results never guarantee future ones. Treat everything here as one input into your own research — not a substitute for it. See where our numbers come from on our data sources page, and put the model to work in the stock screener.

Last reviewed: June 2026 · Maintained by The Stocks School editorial team.

Educational content only — not financial advice or a recommendation to buy, hold, or sell any security. Ratings and projections are model outputs, not guarantees. Do your own research.