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Understanding Results

Learn how to interpret the output from the Systematic Investment Analysis Framework.

Result Overview

The framework generates comprehensive results in multiple formats. Here's how to understand what each component means.

CSV Output Structure

Key Columns

Column Range Description
Ticker Text Stock symbol (e.g., AAPL, GOOGL)
Sector Text Business sector classification
Market_Cap_B Number Market capitalization in billions USD
Current_Price Number Current stock price in USD
Passes_Filters Y/N Whether stock meets all screening criteria
Composite_Score 0-100 Overall investment attractiveness score
Quality_Score 0-100 Financial strength and stability score
Value_Score 0-100 Valuation attractiveness score
Growth_Score 0-100 Business growth prospects score
Risk_Score 0-100 Risk level (lower is better)

Financial Metrics

Column Description
P_E Price-to-Earnings ratio
P_B Price-to-Book ratio
ROE Return on Equity (decimal format)
ROIC Return on Invested Capital (decimal format)
Revenue_Growth Revenue growth rate (decimal format)
Debt_Equity Debt-to-Equity ratio

Score Interpretation

Composite Score (0-100)

The composite score combines all dimensions:

  • 90-100: Exceptional stocks - Strong across all metrics
  • 80-89: Very good stocks - Minor weaknesses only
  • 70-79: Good stocks - Some areas of concern
  • 60-69: Average stocks - Notable issues present
  • 50-59: Below average - Significant weaknesses
  • Below 50: Poor stocks - Multiple serious issues

Individual Score Dimensions

Quality Score (0-100)

Measures financial strength and business stability:

  • 90-100: Excellent - Strong ROE/ROIC, low debt, good liquidity
  • 70-89: Good - Solid fundamentals with minor concerns
  • 50-69: Average - Acceptable quality but room for improvement
  • 30-49: Poor - Weak fundamentals, higher risk
  • Below 30: Very poor - Significant financial issues

Key factors: - Return on Equity (ROE) - Return on Invested Capital (ROIC) - Debt-to-equity ratio - Current ratio (liquidity)

Value Score (0-100)

Assesses whether stock is attractively priced:

  • 90-100: Excellent value - Trading below intrinsic worth
  • 70-89: Good value - Reasonable pricing
  • 50-69: Fair value - Appropriately priced
  • 30-49: Expensive - Trading above fair value
  • Below 30: Very expensive - Significantly overvalued

Key factors: - Price-to-Earnings ratio - Price-to-Book ratio - EV/EBITDA multiple - Price-to-Free Cash Flow

Growth Score (0-100)

Evaluates business expansion and future prospects:

  • 90-100: Exceptional growth - Strong, sustainable expansion
  • 70-89: Good growth - Solid business momentum
  • 50-69: Moderate growth - Steady but unremarkable
  • 30-49: Slow growth - Limited expansion
  • Below 30: Declining - Shrinking business

Key factors: - Revenue growth rate - Earnings growth rate - Free cash flow growth - Market expansion potential

Risk Score (0-100)

Assesses investment risk levels (lower is better):

  • 0-20: Very low risk - Stable, predictable business
  • 21-40: Low risk - Some variability but manageable
  • 41-60: Moderate risk - Normal business volatility
  • 61-80: High risk - Significant uncertainties
  • Above 80: Very high risk - Highly unpredictable

Key factors: - Stock price volatility (beta) - Financial leverage - Business model stability - Sector-specific risks

Filter Status Analysis

Passes_Filters = Y (Yes)

Stock meets all minimum thresholds:

Quality Requirements Met: - ✅ ROE ≥ minimum threshold - ✅ ROIC ≥ minimum threshold
- ✅ Debt levels within acceptable range - ✅ Adequate liquidity ratios

Value Requirements Met: - ✅ P/E ratio ≤ maximum threshold - ✅ P/B ratio ≤ maximum threshold - ✅ Other valuation metrics acceptable

Growth Requirements Met: - ✅ Revenue growth ≥ minimum threshold - ✅ Earnings growth ≥ minimum threshold

Risk Requirements Met: - ✅ Beta ≤ maximum threshold - ✅ Overall risk score acceptable

Passes_Filters = N (No)

Stock fails one or more criteria. Common failure reasons:

Quality Failures

  • Low ROE/ROIC: Poor profitability and capital efficiency
  • High debt levels: Excessive financial leverage
  • Poor liquidity: Insufficient short-term assets

Value Failures

  • High P/E ratio: Stock trading at premium multiple
  • Excessive P/B ratio: Price significantly above book value
  • Rich valuations: Multiple metrics suggest overvaluation

Growth Failures

  • Declining revenues: Business is shrinking
  • Negative earnings growth: Profitability decreasing
  • Stagnant business: No meaningful expansion

Risk Failures

  • High volatility: Stock price very unpredictable
  • Excessive leverage: Dangerous debt levels
  • Sector concerns: Industry-specific risks

Sector Comparisons

Sector Benchmarks

Different sectors have different normal ranges:

Technology Sector

  • Typical P/E: 20-40 (higher acceptable)
  • Expected Growth: 10-30% revenue growth
  • Debt Tolerance: Generally lower debt levels
  • Volatility: Higher beta acceptable (1.2-1.8)

Utilities Sector

  • Typical P/E: 15-25 (lower range)
  • Expected Growth: 2-8% revenue growth
  • Debt Tolerance: Higher debt acceptable
  • Volatility: Lower beta expected (0.6-1.0)

Financial Sector

  • Metrics Differ: Different debt interpretation
  • Interest Sensitivity: Rate environment crucial
  • Regulatory Impact: Capital requirements matter

Cross-Sector Analysis

When comparing stocks from different sectors:

  1. Focus on relative performance within each sector
  2. Consider sector-specific factors (growth vs. stability)
  3. Adjust expectations based on business models
  4. Account for cyclical patterns in commodity/cyclical sectors

Example Analysis

Let's analyze sample results:

Ticker,Sector,Passes_Filters,Composite_Score,Quality_Score,Value_Score,Growth_Score,Risk_Score
GOOGL,Communication Services,Y,98.9,100.0,100.0,100.0,7.2
AAPL,Technology,N,57.9,75.0,0.0,100.0,30.6
TSLA,Consumer Cyclical,N,28.6,50.0,0.0,0.0,9.0

Google (GOOGL) - Score: 98.9

✅ Passes all filters - Quality: Excellent (100.0) - Strong ROE, ROIC, low debt - Value: Excellent (100.0) - Attractive valuation metrics - Growth: Excellent (100.0) - Strong revenue/earnings growth - Risk: Very low (7.2) - Stable, predictable business

Investment Thesis: High-quality growth company at reasonable valuation

Apple (AAPL) - Score: 57.9

❌ Fails value filters - Quality: Good (75.0) - Solid fundamentals but not exceptional - Value: Poor (0.0) - Overvalued - High P/B ratio, expensive metrics - Growth: Excellent (100.0) - Strong business momentum - Risk: Moderate (30.6) - Some volatility but manageable

Investment Thesis: Great company but expensive - wait for better entry

Tesla (TSLA) - Score: 28.6

❌ Fails multiple filters - Quality: Poor (50.0) - Low ROE/ROIC - Capital efficiency concerns - Value: Poor (0.0) - Highly overvalued - Excessive P/E ratio - Growth: Poor (0.0) - Declining revenues - Business momentum lost - Risk: Very low (9.0) - Interestingly, low volatility recently

Investment Thesis: Multiple red flags - avoid until fundamentals improve

Red Flags to Watch

Quality Red Flags

  • ROE below 10% (0.10 in decimal format)
  • ROIC below 8% (0.08 in decimal format)
  • Debt-to-equity above 200% (high leverage)
  • Current ratio below 1.0 (liquidity concerns)

Value Red Flags

  • P/E ratio above 40 (unless high-growth justified)
  • P/B ratio above 10 (asset-heavy businesses)
  • Multiple valuation metrics in expensive range

Growth Red Flags

  • Negative revenue growth for multiple periods
  • Declining profit margins
  • Market share loss to competitors

Risk Red Flags

  • Beta above 2.0 (very high volatility)
  • Excessive debt in cyclical industries
  • Single customer/geographic concentration

Using Results for Investment Decisions

Stock Selection Process

  1. Filter by Pass/Fail: Start with stocks that pass all filters
  2. Rank by Composite Score: Focus on highest-scoring opportunities
  3. Sector Diversification: Don't concentrate in single sector
  4. Individual Analysis: Review specific metrics for each candidate
  5. Qualitative Research: Supplement quantitative analysis

Portfolio Construction Guidelines

Core Holdings (70-80% of portfolio): - Composite Score ≥ 80 - Passes all filters - Quality Score ≥ 70

Opportunistic Holdings (10-20% of portfolio): - Composite Score 60-79 - May fail 1-2 filters with good reason - Higher potential upside

Avoid (0-10% speculative only): - Composite Score < 60 - Fails multiple filters - Significant red flags present

Next Steps