You don't need a CFA to spot a great business. You need seven numbers, in the right order, and a sense for what "good" looks like in each. Here's the checklist we use on TickerMover.
The single most important question you can ask: is the top line getting bigger? Look at the most recent quarter's revenue versus the same quarter last year. For mature large-caps, anything above 10% is healthy. For high-growth names, you want to see 25% or more. A two-quarter deceleration is a yellow flag.
Revenue growth means little if the company is buying that growth at a loss. Gross margin (revenue minus cost of goods, divided by revenue) tells you how much pricing power the business has. Software companies often run 70-85% gross margins; hardware companies 30-50%. What matters most is the trend — flat or expanding margins are fine, contracting margins on growing revenue is a quiet warning.
Net income can be massaged. Free cash flow (operating cash flow minus capex) is much harder to fake — it's the actual cash the business produces. Look at trailing-12-month FCF and the FCF margin (FCF / revenue). For mature businesses, 15-25% FCF margins are excellent. For early-stage growth companies, a clear path to positive FCF within 2-3 years is the bar.
Forget P/E by itself. Use PEG (P/E divided by growth rate), or even better, the Reverse DCF implied CAGR. A 50× P/E on a stock growing 40% (PEG ~1.25) is more attractive than a 20× P/E on a stock growing 5% (PEG 4.0). Multiples are a function of growth, not a verdict on it.
Two ratios matter: net debt / EBITDA (how many years of operating profit it would take to pay off the debt — under 2× is comfortable for most companies, under 1× is great), and the current ratio (current assets / current liabilities — above 1.5 is healthy). Companies with weak balance sheets get punished disproportionately in downturns.
The market is forward-looking. A stock outperforming its sector for 3-6 months usually means analysts and institutional money are seeing something in the numbers that hasn't fully shown up in the public commentary yet. We treat 1-month and 3-month price action as a confirming signal — never the lead signal.
Numbers tell you what's true. The thesis tells you whether it'll keep being true. Before you buy, write down in one sentence why this company will be bigger and more profitable in five years than it is today. If you can't, you're trading the chart, not the business.
Every stock in our universe is run through this checklist every five minutes during market hours. The output is the Alpha Score — a single 0-100 composite that bakes in all seven signals plus a regime adjustment. You can drill into the underlying components on any stock's detail page.
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