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How I Evaluate Stocks

Apr. 04, 2018 9:35 AM ET14 Comments


  • Explains many of the factors I use to evaluate stocks.
  • Gives a general outline of the Stock Evaluator, an evaluation system I plan to offer to subscribers.
  • Backtests the Stock Evaluator on various groups of stocks.

I have long believed that the only way to make money picking stocks is to evaluate each stock on a large number of different criteria. My method has been successful so far, allowing me to make a return of 131% on my investments over the last 29 months (for a CAGR of 41%).

A few weeks ago, I introduced to my followers an “Ideal Stock Evaluation System,” which I hope to offer to subscribers on Seeking Alpha’s marketplace soon. I’m calling it the Stock Evaluator. Subscribers will get a weekly list of over 4,000 stocks, each ranked on a scale of 0 to 100, along with its price, sector, market cap, liquidity, yield, and other information.

In this article and subsequent ones, I want to clarify on what basis I evaluate and rank stocks, suggest some possible uses for the Evaluator, and provide some backtests. Just to be clear: unlike some evaluation systems and all stock screeners, I’m not giving stocks points based on whether they pass certain tests, but instead I’m using a more flexible weighted ranking system that rewards stocks that rank highly on certain metrics compared to others in the same industry, sector, or market.

Here are the top twenty factors that go into the Evaluator, with a word of explanation about each.

  1. Projected earnings growth. This is a combination of four measures: the percent change between the current quarter’s earnings estimate and the same quarter last year; the percent change between this fiscal year’s earnings estimate and that of the most recent fiscal year; the company’s profit margin (with lower numbers better); and the company’s return on assets (with lower numbers better). These last two measures appear counterintuitive, but note that I’m not ranking based on weak earnings but on the potential for strong earnings, which can lead to earnings surprises and upward price movement. See

This article was written by

Yuval Taylor profile picture
Weekly evaluation of thousands of stocks based on sound financial metrics.

I am the author of Zora and Langston: A Story of Friendship and Betrayal, as well as other books. In my spare time I invest, primarily in microcaps; investigate investment conundrums; and write about my investigations on Seeking Alpha and on my blog, http://backland.typepad.com/investigations.

I offer a subscription service, The Stock Evaluator, which sends out weekly rankings for close to 10,000 stocks and also tracks my own portfolio; you can reach it here: https://seekingalpha.com/author/yuval-taylor/research.

I'm proud of my investing track record. In 2016, I made 45% on my investments; in 2017, 58%; in 2018, 14%; in 2019, 16%; in 2020, 105%; in 2021, 73%; and in 2022, 22%. 

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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