Thread by @investing_lion

The past 6 months I have been working to determine my personal (and biased) quality score for most of the companies on my checklist and others I see on fintwit.

Valuation was not a part of this score. Also, this list is not meant to be a stock recommendation.

In order to assign a quality score, I used standard parameters to score aspects such as:
- Management
- Culture
- Financial Resilience
- Moat
- Competitive landscape
- Potential
- Past performance
- Share dilution
- Risks

I am sharing this list for three reasons:

1. I put a lot of work and hours to this, so I thought that this might be useful for others on fintwit.

2. I benefit so much from investors constantly sharing valuable information in here, that I like to add some value in return.

3. I am trying to decrease my biases, so this might ignite some quality discussions. I will gladly listen if you have a different opinion. Here or in my DMs.

I am not sure if sharing is good idea, but I decided to try.

I added a valuation metric next to the quality score.

I use Enterprise Value / 2022 Gross Profit.

This a limited valuation metric but I believe it is better than P/S, P/E and other metrics when comparing companies that are growing fast and sometimes are not profitable.

Keep in mind that if I am not able to determine the competitive advantage of a company or its potential, my personal score will be lower even if this is a result of my own shortcomings.

Also, I am an investor looking for future returns so this quality score system assigns an important score to future growth, optionality and future operating leverage. Companies that have already achieved this may look low. Potential risks decrease the overall score.

Ok, so here we go: Mid-2021 Lion’s Quality Score and EV/GP 2022:

$FB Quality Score: 87 EV/GP: 8.3x
$GOOGL 87 / 10x
$AMZN 86 / 7.3x
$SHOP 85 / 56x
$NVDA 84 / 26x
$ADBE 84 / 17x
$MSFT 84 / 15.4x
$AAPL 83 / 14.3x
$TTD 83 / 31x
$PINS 82 / 17.5x
$SQ 82 / 16.8x
$TCEHY 82 / 15x

$TEAM 82 / 33x
$CRM 82 / 8.8x
$ROKU 81 / 29x
$VEEV 81 / 28x
$PYPL 81 / 21x
$ABNB 81 / 16x
$ZM 81 / 30x
$PTON 80 / 15.4x
$NFLX 80 / 17x
$CRWD 80 / 40x
$SE 79 / 29x
$BABA 79 / 8.5x
$TSLA 79 / 41x
$NET 78 / 50x
$FUTU 78 / 20x
$TWLO 78 / 33x
$COST 78 / 7.6x
$XPEL 78 / 22.2x

$MELI 77 / 22x
$ETSY 76 / 11.4x
$Z 76 / 11x
$TWTR 75 / 13.4x
$JD 75 / 4.1x
$SNOW 75 / 54x
$U 75 / 29x
$FVRR 75 / 25x
$GDRX 74 / 15x
$TDOC 74 / 14.7x
$SHW 74 / 8.3x
$SNAP 74 / 30x
$PD 73 / 12.3x
$AMD 73 / 12.5x
$DOCU 73 / 25x
$OLO 72 / 31x
$UPST 71 / 14x
$BZUN 70 / 1.8x

$CPNG 69 / 11.5x
$FSLY 67 / 23x
$RDFN 66 / 13x
$PDD 65 / 10.4x
$ZYXI 65 / 3.4x
$UPWK 65 / 15x
$MGNI 63 / 11.7x
$SOFI 62 / 18x
$UBER 61 / 7.9x
$EGLX 60 / 13.5x
$SKLZ 60 / 14.2x
$PRCH 60 / 8.9x
$DBX 60 / 6.6x
$OZON 59 / 7.2x
$MARA 57 / 6x
$CLPT 57 / 21x
$KPLT 56 / 4.4x

$CURI 52 / 9.2x
$LTCH 52 / 37x
$YI 51 / 4x
$MYO 51 / 4x
$VRM 50 / 14x
$CELH 50 / 36x
$ATER 41 / 2.7x

Keep in mind that these quality scores are:
1. Biased, based on my knowledge and shortcomings
2. Variable, evolving over time.

If a company, for example, improves their balance sheet, increase their competitive advantages, improves their culture, increase their earnings beats history, decreases dilution and becomes free cash flow positive the score can change considerably.

Also, good investing is not only about assessing quality, but also understanding current trends and market expectations.

A company with a QS of 65 that will evolve to 78 over the next 5 years might provide higher returns than an highly valued 82 that is not improving.

Feel free to share if you strongly disagree with any of these. This a work in process, personal, biased and certainly not perfect.

Here is the graph with all the companies:
x: EV/GP 2022
y: My Quality Score

Sharing this with some friends:
@FromValue @Soumyazen @ParrotStock @PelotonHolder @SixSigmaCapital @Jablamsky @Crussian17 @caleb_investTML @BackpackerFI @kaushik @InvestmentTalkk @JoTrader4 @tpsojda @invesquotes @investiAnalyst @Wolf_Financial

Sharing this with some friends:
@rihardjarc @honam @bahamaben @cperruna @Beth_Kindig @OphirGottlieb @LiviamCapital @7Innovator @eugeneNG_VCap @MaxTheComrade @IrnestKaplan @daniel_toloko @dhaval_kotecha @qcapital2020 @saxena_puru @JonahLupton

A special shout-out to @DavidGFool and @BrianFeroldi that over the years have teached the importance of looking for quality and developing our own checklists to be methodic in our analysis.