WinstonHow the Winston Score works
Every stock page in the Winston Daily App carries a number out of 100. This page explains where that number comes from, point by point, and what it does not tell you.
What the score is
The Winston Score is a 100-point rubric. It takes the figures a company publishes in its accounts, together with market data on price, ownership and dividends, and awards points against fixed thresholds. The same rules apply to every company, so a 72 for a retailer means the same thing as a 72 for a chip maker: the business cleared the same hurdles.
The rubric was written under the direction of Felix Prehn, an economist and former investment banker. It reflects the questions he asks of a company before he would consider owning it, in the order he asks them: is it a good business, is it growing, does it produce cash, is it safe, is the price sensible, who owns it, and does it pay you to wait.
The seven pillars
The 100 points are split across seven pillars. Each pillar is made up of two or three sub-measures, and every sub-measure has its own maximum. Quality carries the most weight because a business that earns thin margins and poor returns on its capital rarely becomes a good long-term holding, whatever else is going for it.
- Quality (30 points). Gross margin 10, operating margin 10, return on capital employed 10. Does the business keep a large share of each dollar of sales, and does it earn a good return on the money tied up in it?
- Growth (20 points). Sales growth year on year 5, earnings per share growth year on year 5, earnings consistency over the last 8 quarters 10. Is the company growing, and has it done so steadily rather than in one lucky quarter? Half the pillar rewards consistency.
- Cash flow (10 points). Cash conversion 6, free cash flow margin 4. Do reported profits turn into cash in the bank? Profits that never arrive as cash score poorly here.
- Stability (10 points). Debt to equity 5, interest cover 5. How much has the company borrowed, and how comfortably can it pay the interest from what it earns?
- Valuation (10 points). Price to earnings 6, the gap between trailing and forward price to earnings 4. What are you paying for each dollar of earnings, and are analysts expecting earnings to rise? A forward ratio below the trailing one earns the extra points.
- Ownership (15 points). Insider ownership 10, institutional ownership 5. Do the people running the company own a meaningful slice of it, and do professional investors hold it too?
- Dividends (5 points). Dividend yield 3, change in the dividend year on year 2. Is there a dividend, and is it growing? Companies that pay no dividend are not penalised, as explained below.
Quality 30, Growth 20, Cash flow 10, Stability 10, Valuation 10, Ownership 15 and Dividends 5 add up to 100.
The five numbers in the screener
The screener shows five quick-read scores for each stock. Each one comes straight from the Winston Score:
- PROFIT (out of 30): the Quality pillar. Gross margin, operating margin and return on capital employed, 10 points each.
- MOAT (out of 10): gross margin on its own. A high gross margin is our best single sign of pricing power. It is the same 10 points already inside PROFIT, shown separately because members filter by it. For banks, MOAT shows capital strength instead.
- CASH (out of 10): the Cash flow pillar. Cash conversion (6) and free cash flow margin (4). For banks, capital strength.
- STABLE (out of 10): the Stability pillar. Debt to equity (5) and interest cover (5). For banks, loan quality.
- VALUE (out of 10): the Valuation pillar. P/E (6) and the gap between trailing and forward P/E (4).
These five do not add up to the Winston Score. Growth (20), Ownership (15) and Dividends (5) are not shown in the strip, and MOAT repeats gross margin. The full breakdown is on each stock's page.
Point thresholds
Each sub-measure earns points against fixed thresholds. The tables below show how many points each level of performance earns.
PROFIT — Quality pillar (30 points)
| Gross margin (/10) | Operating margin (/10) | ROCE (/10) |
|---|---|---|
| 70 per cent or more = 10 | 30 per cent or more = 10 | 25 per cent or more = 10 |
| 55 per cent or more = 8 | 20 per cent or more = 8 | 20 per cent or more = 9 |
| 40 per cent or more = 6 | 12 per cent or more = 6 | 15 per cent or more = 7 |
| 25 per cent or more = 4 | 6 per cent or more = 4 | 12 per cent or more = 5 |
| 15 per cent or more = 2 | 0 per cent or more = 2 | 8 per cent or more = 3 |
| Below 15 per cent = 1 | Below 0 per cent = 0 | 5 per cent or more = 2, 0 per cent or more = 1, below 0 per cent = 0 |
MOAT (10 points)
Uses the same thresholds as gross margin above.
CASH — Cash flow pillar (10 points)
| Cash conversion (/6) | FCF margin (/4) |
|---|---|
| 110 per cent or more = 6 | 20 per cent or more = 4 |
| 95 per cent or more = 5 | 12 per cent or more = 3 |
| 80 per cent or more = 4 | 6 per cent or more = 2 |
| 60 per cent or more = 3 | 0 per cent or more = 1 |
| 40 per cent or more = 2 | Below 0 per cent = 0 |
| 20 per cent or more = 1, below 20 per cent = 0 |
Cash conversion is operating cash flow divided by net income.
STABLE — Stability pillar (10 points)
| Debt to equity (/5) | Interest cover (/5) |
|---|---|
| Below 0.3 = 5 | 15 times or more = 5 |
| Below 0.6 = 4 | 8 times or more = 4 |
| Below 1.0 = 3 | 4 times or more = 3 |
| Below 2.0 = 2 | 2 times or more = 2 |
| Below 3.0 = 1 | 1 times or more = 1 |
| 3.0 or more = 0 | Below 1 times = 0 |
VALUE — Valuation pillar (10 points)
| P/E (/6) | Trailing minus forward P/E (/4) |
|---|---|
| Below 10 = 6 | 6 or more = 4 |
| Below 15 = 5 | 3 or more = 3 |
| Below 20 = 4 | 1 or more = 2 |
| Below 30 = 3 | 0 or more = 1 |
| Below 45 = 2 | Below 0 = 0 |
| 45 or more = 1; negative or missing = 0 |
A forward P/E lower than the trailing P/E means earnings are expected to grow.
Companies that pay no dividend
Many strong companies pay no dividend at all, and it would be unfair to dock them 5 points for a choice about capital allocation. When a company has no dividend, the Dividends pillar is left out entirely. The remaining six pillars are scored out of 95 and the result is rescaled so the score still reads out of 100. A company that scores 76 of a possible 95 shows as 80.
If we have no ownership data at all, Ownership is left out and the score is rescaled in the same way as Dividends.
Banks
Gross margin, cash conversion and debt to equity mean little for a bank, whose whole business is borrowing and lending. For banks the Quality, Cash flow and Stability pillars swap in measures that fit the trade: return on equity, net interest margin and the efficiency ratio for Quality; capital strength, measured by the core capital ratio or the leverage ratio, for Cash flow; and non-performing loans and net charge-offs for Stability. The pillar weights stay the same so bank scores sit on the same 100-point scale as everyone else.
What the bands mean
The number is grouped into six bands so a reader can take in the verdict at a glance before looking at the detail.
- Exceptional: 85 to 100
- Strong: 70 to 84
- Good: 55 to 69
- Average: 40 to 54
- Below Average: 25 to 39
- Weak: 0 to 24
When too much of the underlying data is missing to score a company fairly, the page says "Insufficient data" instead of showing a number.
What the score is not
It is not a price target and it is not a prediction. A company can score 90 and see its shares fall for a year. The score tells you about the business as its published figures describe it today. It says nothing about what the market will decide to pay for that business next month.
It is not personal advice. The score does not know your circumstances, your tax position or what else you own. Nothing on this site is a recommendation to buy or sell.
It does not read the news. A takeover bid, a lawsuit or a product recall will not move the score until it shows up in the reported figures. The morning paper Winston writes for each member covers the news; the score covers the accounts.
How often it changes
The score is recomputed whenever the underlying company data is refreshed. Each stock page states the date of the figures it was built from, so you can always see how current the reading is. Scores move when a company reports a new quarter, when its share price changes enough to shift the valuation pillar, or when ownership filings update.
Who is responsible
Felix Nikolas Prehn sets the rubric and is responsible for it. The rules that govern the writing around the score are set out in the editorial standards. If you believe a figure on a stock page is wrong, write to [email protected] and it will be checked against the source.
The Winston Score is a reading of a company's published figures. It is not financial advice, not a recommendation to buy or sell, and not a forecast of where the share price will go.