Method
Quality Compass scores companies 0–100 for long-term quality, built for the quality sleeve of a barbell portfolio. The final score combines the numerical model (60%) with qualitative moat analysis (40%) — both adjustable in Settings. The qualitative score is itself the average of the five AI-scored criteria below (moat, pricing power, recurring revenue, management, industry structure), so moat is already part of the total Combined score. A score of 67 or more is shown green, 34–66 yellow, below 34 red.
Numerical criteria — 50% each within the numerical score
Each criterion is scored 0–100 from roughly five years of annual financials (full marks at the target, zero at the floor) and the five scores are averaged.
Return on invested capital (ROIC)
How: Average ROIC across all tracked years
Target: ≥ 15% — full marks at 22.5%
ROIC measures how efficiently the company turns shareholders' capital into profit. Businesses that sustainably compound capital well above their cost of capital create value year after year — the single most important marker of quality.
Free cash flow conversion
How: Average of (free cash flow ÷ net income) for each year with positive net income
Target: ≥ 80% — full marks at 100%
Earnings that convert into cash are real earnings. High conversion signals honest accounting, an asset-light model and low working-capital drag; low conversion can mean aggressive revenue recognition or capital trapped in the business.
EBIT margin level & stability
How: 70% weight on the average operating margin, 30% on stability (penalized when the year-to-year standard deviation exceeds ±5pp)
Target: ≥ 15% average — full marks at 22.5%
Durable companies hold steady margins through the cycle. A high but wildly swinging margin suggests cyclicality or one-off gains, so stability is scored alongside the level.
Leverage
How: Net debt ÷ EBITDA in the most recent year
Target: < 2x — zero marks at 4x
Low leverage keeps a quality franchise from being wrecked by a downturn or a rate spike, and preserves the freedom to reinvest or buy back shares. Net debt is total debt minus cash.
Capital intensity & growth
How: 60% weight on capex ÷ revenue (lower is better), 40% on revenue CAGR across the tracked years
Target: capex ≤ 10% of revenue, with a growth bonus up to 15% CAGR
Asset-light businesses that still grow are the best compounders: most of every euro earned can be redeployed instead of being locked into factories, fleets or stores.
Qualitative criteria — AI proposal, your call
The five quality factors below are rated 1–5, averaged and converted to 0–100 for the qualitative score. AI proposes each rating with written reasoning — automatically for top numerical candidates (numerical score ≥ 60) during scans, and on demand from any company page. Your own overrides always take precedence over the AI proposal.
Durable competitive advantage (moat)
Network effects, switching costs, intangible assets, cost advantages — anything that stops competitors from eroding returns.
Pricing power
Can the company raise prices faster than inflation without losing customers? Classic sign of a must-have product.
Recurring / predictable revenue
Subscriptions, long-term contracts and repeat purchases make future cash flows far easier to forecast.
Management capital allocation
Do executives reinvest at high returns, buy back shares when cheap, and avoid empire-building dilution?
Industry structure & barriers to entry
Consolidated industries with high entry barriers protect profitability; fragmented commoditized ones do not.
Markets covered
United States
NYSE / Nasdaq
Finland
Nasdaq Helsinki
Sweden
Nasdaq Stockholm
Norway
Oslo Børs
United Kingdom
LSE
Netherlands
Euronext Amsterdam
Spain
Bolsa de Madrid
Canada
TSX
Each market uses a curated universe of roughly 35–70 quality-biased large and mid caps (~500 tickers in total). You can add any ticker manually from the screener.
Data and limitations
- Financial data comes primarily from Yahoo Finance (about five years of annual history); Alpha Vantage is used as a fallback when Yahoo is missing data.
- Yahoo fields vary by exchange — some European listings report fewer metrics than US ones, and missing fields simply lower that criterion's weight.
- Tracked companies are refreshed automatically once a week; you can refresh any company on demand from its page.
- P/E NTM (forward price/earnings, based on analyst estimates) is shown in the screener and company pages for information only — it is not part of the Combined, Numeric or Qual AI scores.
- This is a research tool, not investment advice. Always verify numbers against company reports before making decisions.