How the six-factor score works — and where it falls short

Every comparison on TickerVerdict ends with two numbers — Coca-Cola 3.5, PepsiCo 2.5, say — and six small verdicts underneath. This guide explains exactly how those are decided. There is no hidden model and no human adjustment: the same rules run on every pair of companies, and they are simple enough to check by hand. That simplicity is a strength and a weakness, and the second half of this guide is about the weaknesses.

The six factors at a glance

Each factor compares the two companies on a small set of metrics and names a winner, calls it a tie, or — when a figure it needs is missing for either company — marks it "not scored". The overall score is then a count: a factor won is worth one point, and a tie or an unscored factor is worth half a point to each company, so the two scores always add up to six.

"Clearly" has a precise meaning, explained below. Notice what is not on the list: trailing P/E. It appears in the comparison table whenever either company has one, but it does not vote. The valuation factor was designed around forward P/E, which needs analyst estimates that filings do not contain, so we show no forward P/E at all — and trailing P/E is too easily distorted by one-off gains and losses to decide a factor on its own. Our P/E guide shows how badly it can mislead.

How each factor is decided

Valuation is a vote. For each of the four measures that both companies report, the cheaper one gets a vote: lower EV/EBITDA, lower price-to-sales, lower price-to-book, higher free-cash-flow yield. A multiple that is negative or missing on either side does not vote. Whoever wins more votes takes the factor; a split vote is a tie. Apple against Intel is a clean split: Apple is cheaper on EV/EBITDA (30.07 times against 43.29) and has the higher free-cash-flow yield (2.73% against 0.57%), while Intel is cheaper on price-to-sales (8.68 against 10.72) and price-to-book (5.65 against 46.55). Two votes each — a tie. Free-cash-flow yield is the one measure that votes even when it is negative, so a company burning less cash relative to its value wins it. Lucid is cheaper than Rivian on price-to-sales (0.84 against 2.92), but Rivian burns far less cash relative to its value (−20.33% against −394.31%), so their valuation vote splits as well.

Growth averages two rates. Revenue growth and EPS growth over three fiscal years carry equal weight. If either rate is missing for either company — most often because a company made a loss in the base year, so no growth rate can be computed — the factor is not scored rather than guessed.

Quality is a weighted blend. Gross margin counts 0.25, operating margin 0.375, return on equity 0.25 and return on invested capital 0.3. Operating margin carries the most weight because it is the hardest to flatter. All four inputs must exist for both companies, which is why banks, which report none of the first two, are never scored on quality.

Balance sheet rewards low debt and easy interest payments. Net debt to EBITDA counts against a company at twice its value, the current ratio counts in its favour, and interest coverage adds 0.1 points per turn, capped at 30 times so that a company with almost no debt cannot win on an absurd ratio alone. A company with no debt at all is scored at the cap. Again, a missing input means the factor is not scored. Apple's filings carry no separately tagged interest-expense figure that we can read, so no Apple comparison is scored on this factor — the rules will not invent the number.

Income adds dividends and half of buybacks. A dividend is cash in hand; a buyback returns value less directly, so it counts at half weight. Two companies that return nothing tie.

Momentum blends share-price returns — 0.4 on one-year and three-year returns, 0.2 on five-year. Today it is not scored on any page, because we have no licensed source of daily price history that we are allowed to publish. We would rather leave it unscored everywhere than fill it from a source we cannot show you.

When "better" is not better enough: the tie bands

A factor is only awarded when the gap is meaningful. For growth, quality, income and momentum, the difference between the two blended figures must be at least 5% of the larger one; for the balance sheet, 3%. Anything closer is a tie.

Nvidia against Micron shows why this matters. On quality, both companies post figures most businesses never reach:

Blended with the weights above, Nvidia's quality composite comes to about 93.2 and Micron's to about 94.4 — a gap of roughly 1.3%. Calling Micron the "higher-quality" business on that difference would be false precision, so the factor is a tie. See the Nvidia vs Micron comparison for the full picture.

One part of each page does break ties: the "which stock fits which investor" list. It names a company wherever it can, so for a tied or unscored factor it falls back to a single headline figure — revenue growth for growth, dividend yield for income, return on invested capital for quality. Only when that figure is missing or level as well does it name no one: "too close to call" after a tie, "not scored" when the factor could not be scored. That is why the Nvidia vs Micron page names Micron as the better fit for quality: its ROIC is higher, 80.45% against 69.14%, even though the quality factor itself is a tie. For value the fallback would be forward P/E, which we never have, so a tied valuation always reads "too close to call".

A worked example: Coca-Cola 3.5, PepsiCo 2.5

The Coca-Cola vs PepsiCo comparison shows every factor at work:

• Valuation — PepsiCo. It is cheaper on all four measures: EV/EBITDA of 11.95 against 27.6, price-to-sales of 1.79 against 8.01, price-to-book of 7.9 against 11.74, and a free-cash-flow yield of 5.94% against 3.18%.
• Growth — Coca-Cola. Revenue grew 3.69% a year against 2.83%, and earnings per share grew 11.55% a year while PepsiCo's fell 2.23% a year.
• Quality — Coca-Cola. An operating margin of 29.34% against 15.32% dominates the blend.
• Balance sheet — Coca-Cola. Lower net debt (2.14 times EBITDA against 2.54) and a higher current ratio (1.36 against 0.94) outweigh PepsiCo's better interest coverage (13.61 times against 8.81).
• Income — PepsiCo. A dividend yield of 4.49% against 2.24%.
• Momentum — not scored, as on every page.

Three factors won plus half a point for unscored momentum gives Coca-Cola 3.5; two won plus the same half point gives PepsiCo 2.5. Nothing in that verdict says which share is the better buy at today's price — it says Coca-Cola is the stronger business on more of these measures, while PepsiCo is the cheaper one.

What the score cannot tell you

Treat the score as a summary of the table, not as advice. Its limits are real:

1. Every factor weighs the same. An income investor and a growth investor care about different factors, but the score counts them equally. Read the six verdicts, not just the total.
2. It looks backwards. Every input is a reported figure. A company whose best years are ahead can lose every factor today.
3. Missing data compresses scores towards 3–3. Banks, loss-makers and young companies go unscored on factors their figures cannot support, and each unscored factor adds half a point to both sides. The JPMorgan vs Bank of America page leaves quality and balance sheet unscored for exactly this reason, and how to compare bank stocks explains what to use instead.
4. It is relative. A 5.5 to 0.5 result, as in Nvidia vs AMD, says Nvidia is stronger on almost every measure than AMD — not that either share is cheap.
5. The tie bands are a judgement. A 5% threshold is our choice; a slightly different line would flip a few close calls.

How to read a verdict in under a minute

Start with the six small verdicts, not the total. Then check the at-a-glance table to see whether a win was decisive or marginal. Read the written analysis for the reason behind the most important factor, and look for anything we withheld — a dash in the table means a number that could not be interpreted, and the numbers we refuse to print explains each case. Finally, read "which stock fits which investor": it is the part of the page that maps the factors to what you actually want from a holding.