Joe said: For what it's worth, though, I once tried comparing Manifest Investing's quality rating against Take Stock's quality rating. Essentially I couldn't see any correlation. My conclusion was that there are at least two ways to measure quality!It's been a while since I looked at Take Stock's quality rating, but I am not surprised at the lack of correlation between it and MANIFEST's quality rating because while there is conceptual overlap, they consider largely different data. Most significantly, MANIFEST's quality rating is primarily based on forecasts of future fundamentals (25% projected sales growth relative to the industry and 25% projected net profitability relative to the industry, plus the EPS stability rating [also 25% of the overall rating] includes EPS projections for the rest of the current FY plus the next two) while Take Stock's quality rating is entirely based on historical performance. Another significant difference between the two is that 50% of MANIFEST's quality rating is based on comparisons the company's projected sales growth and net margin to that of the the industry, corrects a shortcoming that I have long seen in the Stock Selection Guide. Take Stock, on the other hand, looks just at the company's sales growth in isolation.
Probably the main factor leading to the lack of correlation is that as I recall, Take Stock utilizes a series of what I would call "pass/fail" evaluations of historical fundamental sales growth, EPS growth, PTP margin trends and ROE trends. High margins wouldn't necessarily counteract relatively low sales growth or inconsistency. In the MANIFEST quality rating an extremely high ranking in one of the four categories (Financial Strength plus the three referred to above, Relative Projected Sales Growth, Relative Projected Net Margin and EPS Stability) can offset a less favorable ranking in another category.
Both have appeal and can be used successfully, though I tend to prefer the expanded breadth and future-looking nature of the MANIFEST quality rating. How's that for a long way of saying, "I agree that there are at least two ways to measure, or more appropriately in this context, to quantify, quality?"
Cy Lynch