A framework to score stocks for stock selection

Thanks to @svsrikanth and @bhaskarjain on guiding on how to select stocks for portfolio building, specially, when you have to select top 10-20 from a basket of 50. I liked the idea of building some scorecard mechanism and came up with a version 1. Initially thought to post in my portfolio thread but this whole concept looks so interesting with so many points/queries, I thought , a separate threat to initiate a focused discussion with group can lead to interesting findings.

The logic of scorecard is to allocate a score of 100 to 6 parameters:

  1. Historic Financial Performance : This tracks consistency of historical financial performance over last 5/10 years in terms of Revenue growth, EPS growth etc.

  2. Financial Attractiveness : This tracks current or average of last 3 years to check financial attractiveness of firm like : leverage position, working capital requirement to run business, Free cash flow to profit business generates

  3. Corporate Governance : Measures how ethical promoters have been to investors and as a company to overall market

  4. Business Performance/Strength : What are the key strengths of business that stands out

  5. Market Potential : What is the scope of future growth for company and industry?

  6. Valuation Attractiveness : How attractively current share price is placed compared to valuation/financial performance

Under each of these 6 parameters, there are sub-parameters with sub-weights. For every sub-parameter, company gets a score on 1-10 based on its performance. The bench-marking of score for each sub-parameter is done currently on my own domain knowledge, however, i feel it needs lot of improvement on certain sub-parameters. Veterans who knows the numbers of multiple industries in and out can help here to build this more efficiently

Each company gets a score on 100 points on these 6 parameters.

I have tried to evaluate 2 companies though some of parameters still needs lot of research but it helps to initiate a healthy discussion.

My initial thoughts:

  1. I have tried to keep the framework as quantifiable as possible through ways to quantify the qualitative aspects. There are some qualitative indicators also.

  2. This is just 1st draft and there is lot of scope on 2-3 fronts:
    a. Identify right KPI for each parameter
    b. Ensure there is not too much correlation and there is mutual exclusiveness
    c. Use personal research and groups domain knowledge to modify scoring logic on 1-10 scale for each sub-parameter
    d. Finding Optimum weights for each parameter and sub-parameter

  3. For emerging and established companies, scorecard should be dynamic (like same dividend yield rule may not be applied). Do we need dynamic scorecards based on industry, phase of business, different themes - consistency/turnaround story etc. etc?

  4. A separate scorecard may be required for BFSI companies (due to difference in financial KPIs)

  5. Scope of analytics and machine learning techniques to find optimum weight(me being in this field is doing some personal research now)

  6. All said and done, this may be just an indicative quantifiable mechanism to help to take final individual decisions depending on individual qualitative assessment and understanding of business

@Donald, I have used one of your financial analysis excels built on screener and have combined with the one I had prepared for the same. Thanks a lot for keep enriching us with such stuff.

To all members, I open the thread for discussion. The idea is to build such a scorecard that if today I rank 100 companies on a score of 1-100 and after 5 years, I check returns given by these 100 companies, the GAP of RANK distance should be minimal. That will test the strength of framework. This can surely be back-tested going 5 years back and testing with today’s gain.

Note : Moderator, I am not aware of any such thread discussing this, in case, this is repetitive, please pardon and delete it,.

PI Analysis.xlsx (144.7 KB)

Kovai Analysis.xlsx (143.7 KB)


Hi @suru27 thanks for pointers in hotel industry .i am keen to learn excel .Knowing excel is one thing and effectively using the excel is other which you demonstrated .Wonder why someone not visited your Framework .Could you please share your method of analysis .

On the lighter front "APAKI KAMIJ MERI KAMIJ SE SAFD KAISE " Detertgent Adverisement made to explore to the learn the new things Because i know 'SOME oNE SOme where in this WOrld Is WoRking HArd than You "

The analysis is excellent

Sir, I owe you a reply n somehow could not reply this weekend. Will send you a detailed reply on the stuffs discussed this weekend for sure. Sorry for the delay :slight_smile:

Hi @yourraj,
Thanks for the kind words :slight_smile:. We all have our own way of looking at business and I find the way to look through numbers better suited for my strengths. The above excel has undergone lot of change in last 1-2 years and I have built a parent version of above excel where 5 such excels (consider them as 5 different companies in same sector) merge into 1 parent excel where I try to analyze various competitive companies in one go for better insights on company, competition and sector.

It is available for public use and you can find it here

Regarding my method of analysis, this is how I proceed:

  1. 1st Level : This has some hygiene filter criteria in terms of leverage, return on capital, promoter’s skin in game, promoter integrity, historic growth etc. where I filter out 90% of unwanted companies. Intent being it is difficult for one person to study 5000 companies and quality companies also follow Pareto rule

  2. 2nd Level : Go through company excel sheet framework to get a sense of overall business, strengths, concerns, connect financial numbers to get sense of operating model of companies and hence key questions

  3. 3rd Level : Pick 4 close competitors and go through competitive analysis excel sheet to get a sense of competition and sector and more of step 3 but at a multi-company and sector level

  4. If all above hurdles are crossed , then, spend detailed time in going through AR, concall transcripts etc.

The above is regarding method of selection. Coming to capital allocation, frankly, as of now, I do not have a sound process and I am still learning but usually, it is a mix of following:
a. Growing conviction in business with time
b. Valuation attractiveness
c. Longevity of opportunity size

The above is usual process for standard long term investments. However, slowly I am learning other ways to invest like playing with cyclic, mispriced valuations,some major ground level information about management change where future may be different from history, identifying turnaround stories, buying sectors in distress where no one is interested and I do take positions in such scenarios also but the longevity of holding may differ on a case to case basis
Hope this helps.


The tool you have created is very interesting and wonderful .Suarav i tried to use your tool on housing finace companies
whne i click the link than i realise I was not wrong that SOme One someewhereIS Making smarter MOVes .
Congratulations and i am really preveleged to use this SIMPLE but SMart Tool

i remember Steve Job"'s Quote
“Technology is nothing. What’s important is that you have a faith in people, that they’re basically good and smart, and if you give them tools, they’ll do wonderful things with them.”

Step 1: download 6 excel files and kept in same folder “A”

Step two : Downloaded in excel al the files from screener kept in same folder “A”
PNB Housing
Indiabulls Hous
GRUH Finance
Dewan Hsg. Fin
Can Fin Homes

step 2: Opned Competitive Analysis.xlsx than close
opned all files after nameing them to one two …five
PNB Housing
Indiabulls Hous
GRUH Finance
Dewan Hsg. Fin
Can Fin Homes

Step 4: Moved On to five xlsx files to folder “B”

step 5 In the mappping tab i changed the file names with the companies name e.g

I opned all new files and than the Opned Competitive Analysis.xlsx it asked for update i made the update

So Far so good …
**My Question is how can i assure the data which is reflected is 100% comming through the screener .i Am not questioning the quality of your tool but to be on safe side how should i assure tat the OLD data i.e of Hotel industry is replaced with the new set of data i.e Housing Finance sector **
Could you please find time to go through the file i made .That wil be helpful.
Competitive Analysis_housing finance.xlsx (601.7 KB)

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