How Scoring Works
We assess the “health” of stocks by using 20+ metrics that encompass a company’s financial situation, management team, project, and performance.
We classify companies into three categories: exploration, development, and production. Each stage has different criteria and weightings.
Further, we also classify companies in similar jurisdictions. This helps in a few ways – first, it means that political risk, taxes, and other region specific variables are very comparable. Second, it also means that the geology can be more comparable (although there can be many different geological formations within a jurisdiction).
Current Weightings
Here are the current weightings as of November 1, 2013.
|
|
Financial
|
Management
|
Project
|
Performance
|
|---|---|---|---|---|
| Exploration | 54% | 20% | 22% | 4% |
| Development | 27% | 22% | 46% | 5% |
| Production | 18% | 22% | 40% | 20% |
We change the weighting of our scoring system based on market conditions. As we continue to strive towards optimization, we also make minor changes to our formula as we add or modify scoring categories.
What Variables Make Up Each Category?
Financial Score
If company is unable to put money in the ground, it is unlikely to make a discovery or prove up its resources anytime soon.
Generally speaking, to break down a company’s financial score, we look at liquidity ratios, burn rates, cash position, and current cash flow. We are looking here to make sure that a company has the financial means can get to the next stage of its development successfully.
Management Score
Companies with good management teams are going to be able to raise money more easily, make wise decisions, stay disciplined, and align their interests with shareholders.
While there are definitely qualitative aspects that we are not able to cover with our system, Tickerscores does take into consideration: years of experience, insider and institutional ownership, recent insider buying, M&A experience, previous shareholder returns generated, and the percentage of money going into the ground.
Project Score
Even with the best management team and financial backing, a company will be unable to create shareholder returns if a project is not economic.
In this category, we look at the potential upside for project success. This varies depending on stage.
For exploration companies, we have created a model that assigns each property a drill score based on interval length, grade, number of holes drilled, and the average score of drill holes in the area. For development companies, we focus at technical reports, PEAs, and Feasibility Studies to make sure the project is economic. For producers, be look at data like growth in production and cost control.
To assess the political and tax potential of a jurisdiction, we use Fraser Institute rankings.
Recent Performance
This last category, usually weighted the least, is just to see if company fundamentals line up with current price action in the stock. Companies that have strong fundamentals and positive price action will outperform their competitors over time.
