Five Criteria Stock Scorecard: Free Calculator
Most investors do not lose money because they lack information. They lose money because they skip steps. A checklist stops that, and a scorecard makes the checklist fast enough to use every time.
This free calculator scores any company against the five tests we use on Gingernomics. Enter the numbers, and each criterion turns green, amber or red as you type. At the bottom you get a verdict: buy candidate, watchlist or reject.
How to Use the Scorecard
You need about ten numbers. Most come straight from a company's annual report or a free data site such as Yahoo Finance or Morningstar.
Criterion 1, great business. Enter the five-year average return on invested capital, free cash flow as a percentage of net income, and whether gross margins are stable or falling.
Criterion 2, durable moat. Choose whether you can name a specific moat source, and how ROIC behaved in the company's worst recent year.
Criterion 3, aligned management. Enter the change in diluted share count over five years and the percentage of shares owned by insiders.
Criterion 4, sound balance sheet. Enter net debt divided by EBITDA (negative if the company holds net cash) and interest coverage.
Criterion 5, reasonable price. Enter the free cash flow yield, your estimated discount to intrinsic value, or both.
If you do not yet have a value estimate, use our DCF intrinsic value calculator or the FCF yield calculator first.
The Thresholds Behind Each Badge
The scorecard uses the Gingernomics house standard. These are deliberately strict, because a checklist that everything passes is not a filter.
Criterion | Pass | Borderline |
1. Great business | ROIC 15%+, FCF 90%+ of net income, margins stable | ROIC 12%+, FCF 75%+ |
2. Durable moat | Named moat and ROIC held above 12% in the worst year | Named moat, ROIC dipped then recovered |
3. Aligned management | Share count flat or falling, insiders own 1%+ | Share count up no more than 5% |
4. Sound balance sheet | Net debt/EBITDA 2.0x or less, coverage 5x+ | Up to 3.0x, coverage 3x+ |
5. Reasonable price | FCF yield 5%+ or 25%+ below value | FCF yield 3.5%+ or 10%+ below value |
Each threshold is explained in depth in its own guide. Start with return on invested capital and how to spot a moat.
How the Verdict Works
A stock must pass all five criteria to be a clean buy candidate. That rule comes from the idea behind the whole framework: a great business at a silly price is a poor investment, and a cheap business with a weak balance sheet can go to zero.
Buy candidate. All five pass. Write your thesis and your bear case before you buy.
Buy candidate, with care. One borderline result on Criteria 1 to 4 and a pass on price. Ask for a bigger margin of safety.
Watchlist. The business passes but the price does not, or several results are borderline. Set a target price and wait.
Reject. Any outright fail. There are thousands of other companies.
Having worked in investor relations, I have seen how persuasive a good management presentation can be. The scorecard is useful precisely because it does not care how good the story sounds.
Common Mistakes When Scoring a Stock
Using one good year. A single year of high ROIC can be a cyclical peak. Use five-year averages wherever you can.
Guessing the moat. "Strong brand" is not a moat unless it lets the company charge more or keep customers longer. If you cannot name the source, choose "none I can name".
Ignoring dilution. Stock-based compensation quietly transfers ownership to employees. A rising share count is a real cost to you. Our guide to stock dilution shows how to find it.
Applying it to banks and insurers. Financial companies do not have EBITDA or ROIC in the usual sense. Use sector-adjusted measures instead.
Frequently Asked Questions
Is this scorecard a buy signal? No. It is a filter that tells you whether a company deserves deeper research. A pass means "worth your time", not "buy now".
Where do I find ROIC? Morningstar and several free screeners publish it. You can also calculate it yourself using our ROIC guide.
Why is the ROIC bar 15%? Companies that earn well above their cost of capital for many years tend to compound shareholder value. Fifteen percent leaves a clear gap above a typical 8–10% cost of capital.
Does the scorecard save my inputs? No. Nothing you type is stored or sent anywhere. Keep your results in your own watchlist and decision log.
Your Next Step
Read the full framework in the Five Criteria investment strategy.
Put a number on Criterion 5 with the DCF intrinsic value calculator.
Learn the whole research process in how to research stocks.
About the author: Cameron Hayes is a senior investor relations and finance professional who has worked in IR at Nasdaq Copenhagen-listed companies including Nilfisk and Maersk Drilling. He holds an MSc from Copenhagen Business School and a BCom from the University of Ottawa, and founded Gingernomics to teach individual investors the Five Criteria framework. More about Gingernomics.
The content on Gingernomics is for educational and informational purposes only and does not constitute financial advice. Always do your own research and consult a licensed financial advisor before making any investment decisions. Past performance is not indicative of future results.
Comments