1 Liquidity of Stock : based on the 30-day Average Trading Volume
1 = Stock is highly illiquid, the smallest amount of buying or selling can substantially impact the price of this stock. Stocks with an average dollar volume of between $0 and $10 thousand can be easy prey for market manipulation strategies.
2 = Stock with a dollar volume higher than $10,000 and lower than $200,000 is illiquid. A small amount of buying or selling can impact the price. Stocks that are this inactive are often the subject of market manipulation strategies.
3 = A small investor making an average-sized investment would have the ability to move this stock. Stock with a dollar volume higher than $200,000 and lower than $500,000 falls into this category.
4 = Trading in this stock appears active enough to eliminate risks of market manipulation and make the market for buying and selling this stock a fair one. Stock with a dollar volume higher than $500,000 and lower than to $1 million falls into this category.
5 = Stock is heavily traded, generating a dollar volume in excess of $1 million. There is substantial investor interest in the stock. The market for this stock appears to be fair and able to withstand large investments without moving the price.
2 Price Trend: Based On The Chart For The Last 12 Months
1 = share prices are on a strong downtrend which our analysis suggests will continue
2 = share prices have been a strong downtrend while selling pressure seems to have slowed, there are no indicators suggesting this stock will go higher
3 = share prices have a neutral trend of sideways activity
4 = share prices have been on an uptrend
5 = share prices are currently on a strong uptrend
3 Technical Breakout: Based On The Last Three Sessions
1 = stock has just formed one of the chart patterns we consider to be the most dangerous, and suggests an immediate and precipitous decline: stock opens higher and closes lower than the previous day.
2 = stock has just formed a dangerous chart pattern breaking through support levels that can push the stock down further from here: three consecutive sessions that have closed lower than the previous day where each session opens within the body of the previous candlestick.
3 = stock has not made any near term signals suggesting reversal of trend: stock opens and closes at nearly the same level
4 = stock has just formed a short term pattern suggesting a modest short term rise in price. Closing price increases over three consecutive sessions.
5 = stock has just formed what we consider to be the most bullish chart formation possible. Based on this alone it is likely that the share prices will increase in the near term. Closing price not only increases over three consecutive sessions, but also opens with a gap up from the previous close and closes higher than the opening.
4 Price to Sales (P/S=Market Cap/Annual Sales of the Company)
1 = If P/S > 100, shares are priced at an extremely exorbitant premium in relation to the actual sales they do. There is a substantial amount of hype and positive expectations already built into this share price.
2 = If P/S > 10, shares are priced at a high premium in relation to the actual sales they do. There is a substantial amount of positive expectations already built into this share price.
3 = If P/S is equal to the industry average as given by www.reuters.com/finance/stocks/ (open the link, type the company symbol and then go to “Financials”): stock is priced at a standard market premium in relation to the sales the company generates, it does not appear to be over or undervalued according to to the industry
4 = If P/S<10, stock is possibly priced at a fair valuation in relation to the amount of sales the company generates.
5 = If P/S<1, stock appears to be currently undervalued in relation to the amount of sales the company is doing.
5 Price to Book (Book Value = Total Assets-Intangible Assets-Total Liabilities)
1 = If P/B > 30, market value is clearly not based on their tangible assets.
2 = If P/B > 10, market value reflects possibly a higher market premium than the assets of the company.
3 = If P/B is equal to the industry average as given by www.reuters.com/finance/stocks/ (open the link, type the company symbol and then go to “Financials”): market value represents a standard market valuation premium to the assets.
4 = If P/B<1, market value could be slightly lower than the company's assets and potential would suggest.
5 = If P/B < 1, market value seems attractively priced in relation to the assets the company has.
6 Current Cash Needs
1 = This company appears unable to meet bills that are either past due or will come due over the next 90 days. They are facing an immediate liquidity crisis. Which can have a substantial adverse impact on share value (ratio: current assets<current liabilities).
2 = This company appears only able to pay the bills that will come due over the next 90 days. The slightest problem can create a liquidity crisis at the company, and this can have an adverse impact on share value (ratio: current assets= current liabilities).
3 = The company appears to have enough cash on hand to get them through the next 90 days without raising a concern (current assets>current liabilities).
4 = This company appears to be adequately funded for 6 months or more. We see no immediate short term cash problems. The company has enough current assets to cover its current liabilities and its fixed expenses for the next six months.
5 = This company appears to be adequately funded to finance operations for the next year. The company has enough cash to cover its current liabilities and its fixed expenses for the next 12 months.
7 Long-term Cash Needs
1 = They are completely inadequately financed to execute any business plan and in a dire need of additional funding. Given their weak position, this funding will most likely have a substantially adverse impact on existing shareholders. A company in that category has at least twice more total liabilities than total assets.
2 = They are inadequately financed and require additional capital. This funding will most likely be dilutive to shareholders and may cause the share price to decline. The company's total liabilities exceed by 1.5 times its total assets.
3 = They appear to be able to survive past 12 months but their execution of a business plan is doubtful given their limited funding. The company has a balanced capital structure with total assets equal to total liabilities.
4 = They appear to be is adequately financed to execute their business plan. The company has at least twice more total assets than total liabilities.
5 = They are in a strong financial position. They are financed to execute their business plan and have additional funding that will help them survive downturns in the economy and or their industry. A company in than category should have at least 5 times more total assets than total liabilities.
8 Industry Climate For Funding
1 = They are in an industry that is extremely unpopular with investors right now, obtaining investment money will be quite difficult and it may come on extremely unfavorable terms. Obtaining financing can be challenging. And may come on unfavorable terms.
2 = They are in an industry that has a neutral sentiment. Obtaining financing should be of average difficulty and have an averagely adverse effect on shareholders.
3 = They are in an industry that is quite popular with the investment community. Obtaining financing should be relatively simple, and will most likely come on attractive terms.
Hottest = 3
Hot = 2
Unattractive = 1
Oil & Gas - Drilling and Exploration
Oil & Gas - Equipment & Services
Gold, Silver & Other Mining Industries
Internet Technology :
- Application Software
- Social Networking Services
- Multimedia & Graphics Software
- Advertising Services
Electrical Vehicle Manufacturing & Lithium Battery Manufacturing
Renewable Energy: Solar & Wind Farms
Security Software & Services
Online Education & Training Services
Marketing & Management Services
Security & Protection Services and Devices
Biotechnology & Drug Manufacturing
Financial, Investment & Real Estate Services
Telecom Services & Equipment
Diversified Electronics, Desktop Computer Systems & Communication Services
Data Storage Devices
Transportation & Freight Services
Radio & TV Broadcasting
Food & Beverages
9 Sales: based on the data for the latest quarter as compared to the data from the same quarter last year
1 = Sales are substantially and rapidly declining. Sales declined by more than 20%.
2 = Sales are declining. Sales declined by 5%-20% in the latest quarter as compared to the same quarter last year.
3 = They are not growing sales fast enough to attract any attention from investors based on growth in the sales of the company. Sales are growing or declining by 0-5%.
4 = Sales are increasing between 5 and 30%.
5 = Sales are increasing at a sustained and measurable pace. Sales should grow at least 30% for a company to fall into this category.
10 Earnings: based on the data from the past four quarters
1 = This company is losing money and the losses are getting bigger each quarter.
2 = The losses are declining in the last two quarters, or the company has made a profit in one of the last two quarters.
3 = The company had earnings in each quarter, but they are not growing by more than 5%.
4 = Earnings are increasing in each quarter 5-15%.
5 = Earnings are increasing in each quarter by more than 15%.
11 Profitability: gross margin(%)= (total revenue - costs of revenue)/total revenue; considered is data for the past 4 quarters.
1 = They have negative gross margins in each of the four quarters, meaning they are selling their goods for a lower cost than that to produce them. This is not factoring in their fixed overhead. This can have an extreme negative impact on their business and share price.
2 = This company has at least two following quarters with negative margins. This makes their entire business unattractive to us.
3 = This company has positive gross profit margins in each quarter that do not exceed 10% in each quarter.
4 = This company has positive profit margins in each quarter and they are higher than 10% and lower than 30% in at least two quarters.
5 = This company has positive profit margin of over 30% in each quarter.
12 Industry Strength
1 = They are a tiny company that is competing against huge competitors with far greater resources. This should adversely effect their ability to compete over the long term. The company's market cap is lower than $10 million.
2 = They are a small company competing with larger competitors with greater resources. Their ability to grow over the long term will be limited unless this situation is corrected. Market cap: higher than $10 and lower than $20 million.
3 = They seem to have carved out a place for themselves in their industry, but it is a place of mediocrity. The company's main challenge is the large competitors that dominate their industry. Market cap: higher than $20 million and lower than $50 million.
4 = They have a decent amount of market share in their industry but are not the leaders. Market cap: higher than $50 and lower than $100 million.
5 = This is an industry leading company that has risen to the top of its trade. This type of company usually enjoys pricing premiums, higher margins, and higher market valuations in relation to their business. Market cap: above $100 million.