OUR METHODOLOGY
Identifying Growth Compounders at a Reasonable Price
While growth companies are the primary drivers of shareholder returns, the price you pay matters. Our Growth-at-a-Reasonable-Price (GARP) formula is designed to find companies with sustainable growth at reasonable valuations across all global markets.
Harnessing the Power of Compound Growth
Compounding capital at a reasonable rate of return is the secret to the world’s most successful investors. Our goal is to help you harness this powerful force by finding the world’s best growth compounders based on our time-tested GARP methodology. However, single metrics don’t tell the whole story behind a company’s ability to sustain growth. Our fundamental analysis uses 24 key metrics of Growth, Value, Profitability and Cash Flow to identify consistent creators of shareholder value.
Big-Data Technology Allows Us to View 40,000 Companies Globally Through Our Rigorous GARP Lens
Our platform collects, analyzes and interprets millions of data records across thousands of public companies globally to identify the most consistent creators of value.
Our 24 fundamental metrics adjust automatically for company size, sector and industry in order to measure the characteristics that are critical to identifying sustainable growth compounders. Our standardized ratings across all company types in all markets are designed to reward companies with unique traits, including:
Consistent top to bottom line growth—not just explosive short term growth—with sustainable margins and high cash flow generation.
A sound capital structure that does not impair operating growth, combined with high returns on invested capital and low capital intensity.
Reasonable valuations relative to sustainable growth rates and not based on out of context, absolute multiples.
GARP: The Cornerstone of Our Methodology
GROWTH
What Our Growth Indicators Measure
Our indicators measure the company’s growth from top to bottom, including revenue, operating income, net income and earnings per share and across various time periods in the near-term and the long-term. This helps us spot potential problems early as well as gauge management’s focus on generating consistent long-term returns for its shareholders.
For more mature companies, on which investors depend for income in the form of dividends, we measure their ability to sustain and grow those dividends without impairing growth.
VALUE
What Our Value Indicators Measure
Our valuation indicators measure a stock’s multiples in the context of its growth rates, peer group valuations and historical multiples, rather than based on out-of-context, absolute valuation scales. It is therefore possible for a company trading at an absolute high multiple of earnings, sales, book value or cash flow to be awarded a better grade than one trading at lower multiples.
Likewise, we focus on identifying ‘value traps,’ or companies that may appear to be trading at bargain prices but whose business franchises appear to be impaired, rendering them poor investments at any price.
PROFITABILITY
What Our Profitability Indicators Measure
We pay particular attention to management’s allocation of capital in order to identify superior business models with high returns on equity, high, expanding and defensible profit margins and superior long-term shareholder returns.
For banks and financial institutions we pay close attention to their cost of capital, the income earned on it and the sustainability of their margins.
CASH FLOW
What Our Cash Flow Indicators Measure
We evaluate closely a company’s capital expenditures, its leverage and management’s ability to efficiently deploy capital. We identify companies that strike a good balance between the consistent generation of free cash flow and ample investments in future growth-generating initiatives.
For banks and financial services firms we pay attention to their solvency based on the quality of their assets and their strength of their balance sheet. Our analysis tries to anticipate any problems for the firm’s shareholders should there be a deterioration in the quality of its assets or overall business.
A NOTE FROM OUR FOUNDER
How We Designed MarketGrader to Change the Way You Invest
“We founded MarketGrader on the belief that consistent creators of economic value, regardless of size and domicile, are the best long-term creators of shareholder value.
Our trusted, objective, big-data powered research methodology is designed to show you quickly and easily—based on that criteria—which investments provide the best money-making opportunities. Period.”
CARLOS DIEZ
Founder and CEO of MarketGrader
FAQ'S
How does MarketGrader perform its analysis?
Our platform combines quantitative and fundamental research to help you identify the best creators of long-term shareholder value. Our system compiles company data from reported financial statements, share prices and earnings estimates and analyzes each stock based on our proprietary growth-at-a-reasonable-price (GARP) + quality methodology. Finally, our analysis is presented in 24 fundamental indicators across Growth, Value, Profitability and Cash Flow, which are summed up in an overall score and a buy, hold or sell rating for every stock that we cover.
What’s different about your investing ideas?
We leverage our extensive database with millions of data points and over two decades of history to help you find truly unique investment ideas, not often found elsewhere. We run our sophisticated screens daily to help you find fresh long and short ideas from across all equity markets globally. Our interface makes it easy to narrow down idea lists by type and by region. Find unique opportunities across ideas like ‘Priced to Perfection’, ‘Speculative Plays’, ‘Rebound Opportunities’, ‘Best Stocks on Sale,’ ‘Growth Compounders,’ or ‘New Dividend Candidates’.
What’s the benefit of creating a watchlist?
By setting up your own customized watchlists, you can upload an unlimited number of equity portfolios to rapidly view their breakdown by Fundamentals, Sentiment, Size, Style, Domicile or
Exchange. Then, you’re able to set alerts across entire watchlists to track price changes, earnings reports, ratings changes and sentiment changes.
Tell me about your indexes.
Over 50 global smart beta indexes give you a unique alternative to traditional market capitalization weighted benchmarks. All constituents are selected on the basis of our fundamental company ratings, providing investors exposure to the best companies across countries, regions, sectors and market segments globally.
47 of our 52 indexes have beaten their benchmark annually, for a 90.4% batting average. They’ve outperformed their benchmarks by 4.42 percentage points per year on average for at least ten years.
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