Here is how MarketsMojo evaluates every company
Each company is evaluated across multiple parameters and our final call on the stock is crystalized as the Score and Call on the company.
Mojo Score
Every company is rated on a scale of 0 to 100, with higher the score the better. The Score is accompanied with our call on the stock which has a scale across
- Strong Buy
- Buy
- Hold
- Sell
- Strong Sell
To arrive at the Mojo Call on a stock, we look at 4 key Dot parameters of
- Quality: Long Term Fundamental Strength
- Valuation: Attractiveness of the stock at the current price and multiples
- Financial Trend: Latest results trend
- Technicals: Near term price and volume momentum
Quality: Long Term Fundamental Strength
We believe High Quality companies are the ones which demonstrated strong fundamentals consistently over a long period. Quality has three major groups
- Growth: Long Term growth in sales, operating profit and net profit
- Capital Structure: Suitability of company’s debt measured and debt serviceability. For banks this is measured using capital adequacy ratios
- Management Risk: Company’s ability to deliver return on its capital over a long period of time, coupled with market linked factors to determine whether the profits are real like dividend payouts, tax payout etc. We also give importance to institutional holding and holdings by domestic funds.
Quality Grades- Companies are rated on the below scale
- Excellent
- Good
- Average
- Below Average
Valuation: Attractiveness of the stock at the current price and multiples
We believe a company with stronger fundamentals can justify higher valuation multiples but a company with weak fundamentals cannot even justify lower multiples. In our relative valuation measure we look at the below key parameters
- Fundamental valuation: By looking at the relationship of the fundamental variable and valuation multiple we arrive at the regression equation to calculate where the company at its current fundamentals should trade. We adjust this derived number for the company’s sector and its own growth and debt levels. We then compare where the company is trading vs where it should trade.
- Past Valuation: We measure the difference in the premium / discount which the company is trading at vs its own past
- Other Factors: Other key factors are company’s PEG, Dividend Yield (upgrade) and Extreme valuations (downgrade)
Valuation Grades- Companies are rated on the below scale
- Very Attractive
- Attractive
- Fair
- Expensive
- Very Expensive
- Risky
Financial Trend: Latest results trend
Financial trend looks at the latest results of the company and measures the momentum in the key financial parameters. It looks at various parameters across periodic results, annual profit and loss, balance sheet, shareholding (ownership) and cash flows.
For instance, trend in quarterly revenues would incorporate the growth rate, the trajectory of growth, consistency of growth etc.
Financial Trend Grades- Companies are rated on the below scale
- Outstanding
- Very Positive
- Positive
- Flat
- Negative
- Very Negative
Technicals: Near term price and volume momentum
Technicals look at the near-term price and volume momentum. Through Technicals we try to catch the underlying trend in the stock, and combine it with fundamentals of the company for better timing decisions.
We look at the below parameters
- MACD- weekly and monthly
- Bollinger Bands- Weekly and Monthly
- RSI- weekly and monthly
- KST- weekly and monthly
- OBV- weekly and monthly
- Dow Theory- weekly and monthly
- Moving average- Daily
Dot Combinations and Final Score
Once a company is evaluated on the 4 dots, relative importance to each dot to arrive at the final Mojo score is determined using a dynamic model which monitors the relative importance to be given to each dot and modify the weights when necessary.
