Cyceon has developed – and keeps improving – its own average with a view to better assessing the value, growth and dividend potential of large stocks.
As per our terms and conditions, remind that the “Score” is only indicative and does not constitute any investment advice.
Our “Score” system aims to identify the most valuable opportunities available on the stock markets according to a large number of considerations, either financial or contextual.
That small two-figure “Score” that we provide you with is the outcome of a long, hard, tough in-depth reading and interpretation of long-term financials and related trends.
We do our best to provide you with the most accurate data.
Our main goal is to identify stocks with the best ability to both grow their value and their dividend as we search for the most stable, resilient sources of long-term compounding income.
We give much importance to:
1) Moat + Competitive Advantage
2) Earnings per Share (EPS)
3) Return on Invested Capital (ROIC)
4) Free Cash Flow (FCF)
5) Book Value per Share (BVPS)
Our scoring process is very demanding and not many stocks pass the 30-point threshold. Both the fundamentals and the ability to grow shareholder’s value and income in the long term must be of top quality.
Remember that most of the companies we cover have already gone through a very stringent process of pre-selection, consequently most of the companies that make into our website are already part of the corporate elite.
Having a score above 30 points doesn’t necessarily mean the stock is immediately a good investing opportunity, however we did find very robust fundamentals and growth potential. But clearly, a 30-point or more company does rock and not in mysterious ways.
Most often, a 30-point or more company has all the qualities to be a good long-term investing opportunity, yet there are still things which could alterate such a bright future, for instance bitter trade talks between two major countries.
Having a score under 30 points doesn’t necessarily mean the stock isn’t a good investing opportunity, however we did find something in the financials that brought down the average.
Just a small detail can significantly lower the final score by several points, but you know the old saying about details. For instance, it can be a disappointing year of Earning per Share (EPS) or Sales or a low 5-year Dividend Growth Rate (DGR).
Although we calculate the Chowder Number, therefore taking the Last Price and the momentaneous Dividend Yield into account, the Price by itself doesn’t have much relevance to us, since it depends on Mr. Market’s good or bad mood, and is thus indirectly included into our average by using the Earnings per Share (EPS).
1) The first consists of collecting figures extracted from annual and quarterly reports,
2) The second consists of scoring the figures according to specific criteria,
3) The third consists of interpreting the different results and their interrelations,
4) The fourth consists of assessing the strength, the challenges and the environment of the asset under scrutiny.
1) First, the financial data is the basis for our analysis, the so-called “objective” part,
2) Second, the data calculated and then consolidated are interpreted according to contextual and future considerations, this is the so-called “subjective” part.
One would prefer the whole process to be totally objective in order to communicate the information as free as possible from any external factor, even though “errare humanum est.”
However, just as there can be as many interpretations as there are analysts for the same set of data, there is necessarily a degree of subjectivity in the information Cyceon delivers.
In order to minimize any subjectivity for the benefit of maximum objectivity, we therefore focus on figures whose trend is beyond doubt – an increase is not a decrease and vice versa.
When Earnings per Share (EPS) grow in parallel with the Book Value per Share (BVPS) and the Return on Invested Capital (ROIC), nobody denies that it is a positive development for the asset concerned.
The computer part
Basically, our “Score” is set, in a non-exhaustive way, according to these objective criteria, in order of importance :
1) The growth curve of the financials’ most basic figures (sales, revenues, profits, ROIC),
2) The constancy and then the sustainability of the identified trends,
3) The consistency and then the sustainability of dividend growth if part of a DGI strategy.
The human part
In addition, our “Score” is refined, in a non-exhaustive way, according to more subjective criteria derived from human analysis – and therefore fallible, in order of importance:
1) The “moat” and the ability of the competition to “reach” the asset in question,
2) The competitive advantage and the ability of the asset concerned to retain it and at what cost,
3) The size of the barriers to entry,
4) The state of supply and especially the state of demand for the products and/or services offered by the asset concerned in the long term,
5) The quality of the management on which we admit however that we have few means to evaluate it with strong relevance.
Because subjectivity can never be avoided 100% when it comes to evaluating an asset driven by human beings (managers, employees, clients), our “Score” system is therefore perfectible.
Nevertheless, we can affirm that the relevance of our “Score” system is real with regard to numerous past evaluations that have proven to be accurate and you will also be able to see this over time.
It improves over time
Like companies, our analysis and “Score” process evolves regularly in order to be as accurate and relevant as possible.
Just as engineers work to improve the ability of computers to learn, each additional analysis, interpretation and data potentially improves our system.
Given that long-term investment is based on often pragmatic and rather simple considerations – will we still be drinking Coca-Cola in 2050? – human intelligence remains a key factor in our efficiency.
By nature, any interpretation is fluctuating – a “Score” is also an interpretation even if it is only a simple number – and therefore some may disagree with it and this is inevitable.
What is important, therefore, is that our information is delivered with the utmost seriousness and sincerity, with a constant concern to be as objective as possible.
It’s just a tool
As explained above, the “Score” does not indicate an opportunity to buy or sell – it is in no way an investment advice – but it reflects an evaluation of a set of elements that contribute to the quality or fragility of the asset under study.
Any commentary on a specific asset published by Cyceon will be based solely on our interpretation and should not be considered as a recommendation, our “Score” and the information that accompanies it is only a tool that we hope you will find useful.