How the Winston Score works

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, Growth 20, Cash flow 10, Stability 10, Valuation 10, Ownership 15 and Dividends 5 add up to 100.

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.

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.

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.

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