roovestor company score – Designed to Make Your Investment Decisions Easier

roovestor company score - Designed to Make Your Investment Decisions Easier
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The roovestor company score is our exclusive offer to you – Your roovestor premium account gives you full access to the roovestor stock analysis template with 20 well-selected criteria. The template is designed to make your investment decisions easier. Before making an investment, it is essential to understand each company from both a qualitative and quantitative perspective. The roovestor company score will help you to simplify and speed up your decision making process. This is how it works.

Creating Value for our Users

roovestor company score Creating Value
Illustration 1: Speed up your process for stock research by using the roovestor company score

Doing your research for any given investment is quite complex – you’ll feel like a climber in front of a mountain. It will take you a lot of time and effort to gather all the data you need and to come to the right conclusion. The typical research process consists of many steps like looking for historical financial data (e.g. by using Annual Reports), calculating essential Key Performance Indicators (KPI’s), evaluating the results and looking beyond the numbers (e.g. management, business model). After all these steps you will be able to answer the question that matters: Is it a buy?

Roovestor will help you to change that role and take the work away from you. You will not be a climber in front of a mountain anymore. Roovestor will give you a birds eye view on your investment target – You are an eagle in the sky! It is much more comfortable to look at the stocks from a “bird perspective” and just pick up the one you are interested in. We will do all the work for you – from research to data preparation and visualization. Our database for stock analyses is continuously growing giving you more and more flexibility in your investment decisions.

The Concept at a Glance

The reading time of our stock analyses is usually no more than 10 minutes. 10 minutes that can save you from a bad investment. Each stock analysis consists of two main sections:
Qualitative Analysis: Company History, Business Model, SWOT-Analysis and Management
Quantitative Analysis: roovestor company score

To make sure you understand how the model works and how exclusive the offer is, we will publish free stock analyses from time to time – all based on the roovestor company score. As a PREMIUM member, you will get access to the entire database of our stock analyses.

roovestor company score The Concept
Illustration 2: roovestor company score (the concept)

The roovestor company score consists of 20 evaluation criteria divided into 4 categories: Revenue, Profitability (with two subcategories), Cash Flow and Risk (with two related key measures). We shed light on the essential questions: Is the company growing – even faster than inflation? Is the growth trend positive? How is the performance stability? Does the company’s debt situation and stock price volatility bear a high risk?

Category #1: Revenue

roovestor company score criteria (Revenue)
Revenue shows a company’s ability to find customers for its products. Company growth is usually measured in terms of revenue. Successful companies are able to increase their revenue on a yearly basis. Negative revenue growth is a warning signal and can result from a variety of causes. Customers may no longer be satisfied with the company’s product or service quality, or competitors may offer more appealing products or engage in better marketing. Macroeconomic triggers can also cause negative sales growth, as recently demonstrated by the Corona crisis. As pandemics are temporary events, changing trends within industries are more serious and have a higher impact on revenue in the long run (e.g. oil industry negatively affected by the emerging e-mobility trend).
In our revenue analysis, we not only check the revenue for a positive growth compared to the prior year. We also check for a revenue growth of more than +2 % in order to compensate the inflation rate. Furthermore, we compare the growth rate with the trend based on the 5-years average. A company will achieve full 4 out of 4 points if, in addition to the aforementioned criteria, the revenue level also has been stable over a 3 years period.

Category #2: Profitability

Earnings Before Interest and Taxes (EBIT)
roovestor company score criteria (EBIT)
EBIT is a very common profit metric and often used to reflect a company’s operating profit situation. Rising revenues can have a negative impact on EBIT (e.g. due to higher freight costs). Thus, these measures should always be illuminated together. Leading companies are able to improve both revenue and operating profit. EBIT stands for “Earnings before Interest and Taxes”. For calculating EBIT, you take the net income (from the profit and loss statement) and adjust for interest and taxes. In our roovestor company score, EBIT can help to achieve up to 4 additional score points. This full EBIT score is only achieved if the company can improve its EBIT compared to the prior year and with a growth rate of more than +2 %. Furthermore, the EBIT margin (EBIT devided by revenue) must be the best since 5 years. At least the EBIT must be stable (no drop) over a 3 years period.
Return on Capital Employed (ROCE)
roovestor company score criteria (ROCE)
ROCE stands for Return on Capital Employed. ROCE is calculated by dividing a company’s EBIT by its Capital Employed (Total Assets less Current Liabilities). Imagine a company is borrowing an immense amount of money and using it to drive the business forward. This probably will push both, revenue and EBIT (interest payments are not considered here). ROCE will help you to understand how efficient a company works with its Capital Employed. Has the company been able to improve its ROCE compared to the prior year and to even achieve a ROCE of more than 15 %? Has the ROCE growth (percentage points) been higher than the average ROCE growth within the previous 5 years? Has the ROCE been stable (no drop) over a 3 years period? These are the criteria we look for in our ROCE analysis.

Category #3: Cash Flow

roovestor company score criteria (OCF)
Within the Cash Flow Statement, the Cash Flow is partitioned into three types that are linked to the underlying cash-generating activities: Cash Flow from operating, investing and financing activities. In our roovestor company score we are fully focusing on Operating Cash Flow (OCF). It is crucial for companies to keep its OCF positive as it results from the core business and thus indicates the financial success resulting from the operating business activities. OCF is calculated as the net cash provided by operating activities. This measure consists of net income or loss adjusted by provisions and depreciation/amortization as well as other non-cash expenses and income, but also by changes in Working Capital (WC).
In line with the aforementioned KPIs, OCF must be higher than in the previous year and increase by more than +2 %. In order to additionally assess the OCF situation over a longer time period, we check whether the company was able to achieve the highest (inflation-adjusted) OCF for 5 years. Furthermore, no OCF deficite is allowed over a 3 years period in order to achieve a full 4 out of 4 OCF score.

Category #4: Risk

Net Debt / EBITDA Ratio
roovestor company score criteria (Net Debt EBITDA Ratio)
In order to calculate the Net Debt, the only thing you need is the balance sheet of a company. You take the interest-bearing (long- and short-term) liabilities and deduct cash and cash equivalents from the assets section. The Net Debt can be negative if the relevant assets exceed the interest-bearing (long- and short-term) liabilities. In such a case, the company is able to use its liquid assets to instantly pay off its interest-bearing (long- and short-term) liabilities.
EBITDA is the abbreviation for „Earnings before Interest, Taxes, Depreciation and Amortization“. It can be derived from the income statement (also known as the „P&L statement“) which ends with the net income of a company. An easy way to determine the EBITDA is to take the net income and to add-up the „ITDA“ components (Interest, Taxes, Depreciation and Amortization).
You can use the Net Debt / EBITDA ratio in order to identify red flags for the debt situation of a company. It is generally said that a company has a stable financial situation if the Net Debt / EBITDA ratio is not higher than 4:1. In other words, the company shall not need more than 4 years to generate its Net Debt with EBITDA. In our roovestor company score, we check the company’s debt situation for two facts: Was the company able to reduce its Net Debt / EBITDA ratio compared to the prior year? Has the Net Debt / EBITDA ratio always been in the “green zone” (not higher than 4:1) since 5 years? If both questions can be answered with “Yes”, the company will achieve full 2 out of 2 points in this section.
Max. Stock Price Drawdown
roovestor company score criteria (Max Stock Price Drawdown)
Our Max. Drawdown score is linked to the stock price development of a company. This measure indicates the downside risk of a share over a given period. It is the worst case of any investment: Buy high and sell at the lowest price that comes after. It is not unusual for prices to change. But high fluctuations lead to high risks. Thus, we have defined a tolerable limit for the Max. Stock Price Drawdown over a 5 years period. 2 points can be obtained within this section: 1 point for a Max. Stock Price Drawdown better than -50 % and 1 point for a Max. Stock Price Drawdown better than -35 %.