How the ShareSift value score works
Every stock page on ShareSift shows a value score out of 100. This page explains exactly how that number is produced: which tests it runs, how much each one counts, and — just as important — what it cannot tell you.
The short version: the value score is thirteen fixed pass/fail tests on a company's reported figures. Each test carries a weight, the weights add up to 100, and the score is the sum of the weights a company passes. There is no model, no machine learning and no hidden adjustment. With the same figures, you can reproduce the score by hand.
The thirteen tests
| Test | Group | Points |
|---|---|---|
| Trailing P/E below 15 (and positive) | Valuation | 12 |
| Forward P/E below 15 (and positive) | Valuation | 8 |
| Price-to-book below 1.5 | Valuation | 12 |
| EV/EBITDA below 10 | Valuation | 12 |
| PEG ratio below 1 | Valuation | 10 |
| Price-to-sales below 2 | Valuation | 6 |
| Return on equity above 12% | Quality | 8 |
| Profit margin above 8% | Quality | 6 |
| Debt-to-equity below 100% | Health | 6 |
| Current ratio above 1.5 | Health | 5 |
| Positive free cash flow | Health | 5 |
| Revenue growth above zero | Growth | 5 |
| Dividend yield above 2% with a payout ratio under 70% | Income | 5 |
| Total | 100 |
Sixty of the hundred points are about price — how much you pay for each dollar of earnings, book value, cash flow or sales. The other forty are about whether the business underneath is profitable, solvent, growing and able to pay its dividend. That balance is deliberate. A score built only on price would rank struggling companies highest, because a business in trouble usually looks cheap. The quality and health tests stop the score rewarding cheapness that has an obvious cause.
Why the thresholds are where they are
The cut-offs are conventional rather than optimised. A P/E of 15 and a price-to-book of 1.5 come from the value-investing tradition associated with Benjamin Graham; a PEG below 1 is the usual shorthand for "growth not fully priced in"; EV/EBITDA below 10 is a common screen for reasonably valued businesses. They were chosen because they are widely understood and easy to check — not tuned to make any particular stock look good.
That has a cost worth knowing: fixed thresholds treat every sector alike. A software company and a supermarket with the same P/E are not equally cheap, because their growth and capital needs differ. ShareSift handles this separately — every stock page also compares the company's P/E, price-to-book and dividend yield with the median of its own sector — but the value score itself does not adjust for sector.
A missing figure counts as a fail
This is the most important thing to understand about the score, and the most common source of surprise.
If a figure is not reported, the test that needs it fails. It is not skipped, and the remaining tests are not scaled up to compensate. A company that does not report a forward P/E simply cannot earn those 8 points.
This is deliberate. The alternative — scoring only on the tests that have data — would let a company with three reported figures, all favourable, score 100. A thinly covered stock would then outrank a well-documented one precisely because less is known about it. Treating missing data as a fail means the score can only reward what has actually been reported.
The trade-off is that some kinds of company score low for reasons that have nothing to do with value. Banks are the clearest example, below.
Worked examples
These are live figures from ShareSift at the time of writing. Scores change as prices and reports change.
Apple (AAPL): 30 out of 100
Apple passes five tests: return on equity (well above 12%), profit margin (about 28%), debt-to-equity (about 78%, under the 100% line), positive free cash flow, and revenue growth. That is 8 + 6 + 6 + 5 + 5 = 30 points.
It fails every valuation test. Its trailing P/E is about 38, its price-to-book about 45 and its EV/EBITDA about 29 — all far above the thresholds. Its current ratio is just over 1, and its dividend yield of about 0.3% is below the 2% the income test asks for.
The lesson: a low value score is a statement about price, not quality. Apple's filings show a strong business — a Piotroski F-Score of 6 out of 9 and an Altman Z-Score far inside the safe zone. The value score is simply saying that the market already prices that strength in full.
BHP (BHP.AX): 40 out of 100
BHP passes seven tests: return on equity (about 24%), profit margin (about 17%), debt-to-equity (about 50%), current ratio (about 1.9), free cash flow, revenue growth, and the dividend test — a yield of about 4% paid from around 69% of earnings, just inside the 70% limit. That is 8 + 6 + 6 + 5 + 5 + 5 + 5 = 40 points.
It misses every valuation test, but some only narrowly: EV/EBITDA is about 10.9 against a threshold of 10, and its forward P/E of about 16 is close to 15. A modest fall in price could move several tests at once — which is why scores can jump rather than drift.
Commonwealth Bank (CBA.AX): 19 out of 100
CBA passes only three tests: return on equity (about 14%), profit margin and revenue growth — 19 points.
But look at why it fails the rest. Banks do not report a current ratio, an EV/EBITDA or a conventional debt-to-equity in the way an industrial company does: their balance sheet is mostly deposits and loans, and "debt" is the product they sell. Each of those missing figures is a fail. Free cash flow is likewise not a meaningful measure for a bank. And its dividend payout of about 76% is just over the 70% the income test allows.
The honest reading is not "CBA is poor value". It is "this score is not designed for banks". For a bank, the sector comparison on its page — P/E and price-to-book against other banks — is a far better guide.
What the score does not tell you
The value score reads reported numbers. It does not know:
- what the company sells, to whom, and whether that is getting harder;
- whether management allocates capital well;
- whether a low price reflects a temporary setback or a permanent decline;
- anything that has happened since the last reported figures.
A stock that scores 80 is not a recommendation, and a stock that scores 20 is not a warning. The score is a fast, consistent way to see which companies are cheap on conventional measures — the start of a question, not an answer.
How to use it well
- Read it next to the quality checks. A high value score with a weak Piotroski F-Score is the classic value trap: cheap, and getting worse. See the Piotroski F-Score explained.
- Look at which tests passed, not just the total. Two stocks on 40 can have nothing in common.
- Compare within a sector, not across the whole market.
- Check the figures are recent before relying on a high score.
This information is general in nature and does not take into account your objectives, financial situation or needs. ShareSift is not a financial adviser and does not hold an Australian Financial Services Licence. Consider whether any information is appropriate for you and seek independent advice before making an investment decision.