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Exhaustive 8-Factor Glossary & All 28+ Rating Classifications
Complete institutional reference guide defining all 8 quantitative factors and every underlying rating generated by our database audit.
Factor 1
Market Beta (Volatility & Systematic Risk)
Measures how much a stock moves compared to the overall stock market baseline (1.0).
The Analogy: A cruise ship is the market. A High-Beta stock is a jet ski tied to the back, flying high and crashing hard on waves. A Low-Beta stock is a heavy anchor dragging behind, providing calm, stable motion.
Rating Classifications:
Low Beta (Defensive): Moves significantly less than broad market; cushions drawdowns.
Market Beta (Neutral): Tracks market volatility in lockstep (Beta ~ 1.0).
High Beta (Aggressive): Amplifies market swings. High reward in bull markets, high risk in corrections.
Factor 2
Size (Market Capitalization & Agility)
Evaluates corporate scale, equity float, and liquidity constraints across global markets.
The Analogy: Speedboats (Small caps) make tight turns quickly; massive oil tankers (Mega caps) move slowly but carry immense structural weight.
Rating Classifications (5 Tiers):
Mega Cap: Trillion-dollar institutional titans with supreme balance-sheet liquidity.
Large Cap (Core): Established market leaders providing baseline portfolio stability.
Mid Cap: Balanced growth enterprises with solid operational runway.
Small Cap: High-agility businesses possessing significant alpha expansion potential.
Nano Cap: Micro-scale equities tightly governed by ADV liquidity caps.
Factor 3
Momentum (Price Trend Persistence)
Tracks relative price outperformance over rolling institutional holding periods.
The Analogy: A freight train rolling down a track—once momentum is established, winning trends tend to persist due to institutional accumulation.
Rating Classifications:
Strong Upward Trend: Leading relative strength outperforming 80%+ of benchmark.
Consolidation: Sideways price action digesting prior moves; neutral signal.
Downward Lag: Underperforming relative price trend; excluded from conviction longs.
Factor 4
Value (Fundamental Mispricing)
Identifies equities trading at a statistical discount relative to earnings, free cash flow, and book value.
The Analogy: Shopping at an exclusive department store clearance sale—acquiring identical cash-flowing assets for 60 cents on the dollar.
Rating Classifications:
Deep Value: Statistically cheap across multiple fundamental valuation metrics.
Fair Value / Discounted: Reasonably priced relative to cash generation capabilities.
Growth Premium: Priced at a valuation premium reflecting aggressive future earnings expansion.
Factor 5
Profitability (Robust Operating Margins / RMW)
Measures genuine cash generation efficiency and return on equity (Robust Minus Weak).
The Analogy: Two lemonade stands sell equal cups, but Profitability measures who actually retains cash after paying all operating expenses.
Rating Classifications:
Robust Operating Margins (RMW): Elite cash conversion, high ROE, and pricing power.
Neutral Earnings: Average industry operating efficiency.
Weak Margins: Low or negative free cash flow conversion.
Factor 6
Investment (Conservative Asset Growth / CMA)
Evaluates corporate capital allocation discipline (Conservative Minus Aggressive).
The Analogy: Prudent CEOs invest carefully in high-ROI projects; undisciplined managers scatter cash into vanity acquisitions that destroy shareholder equity.
Rating Classifications:
Conservative Capital Allocation (CMA): Disciplined reinvestment and lean balance sheets.
Aggressive Expansion: Rapid asset growth carrying high execution risk.
Factor 7
Integrity & Health (F+M+Z Forensic Shield)
Combines Altman Z-Score, Piotroski F-Score, and Beneish M-Score, strictly capped at 100%.
The Analogy: A forensic auditor inspecting financial statements under a microscope to guarantee zero bankruptcy risk and clean earnings.
Rating Classifications:
Pristine Forensic Shield (>85%): Bulletproof solvency, zero manipulation risk, and elite quality.
Moderate Watch (50-85%): Acceptable solvency, but requires routine monitoring.
High Risk (<50%): Warning flags triggered in accruals or debt coverage.
Factor 8
Eco-Efficiency (EEF / Carbon & Resource Intensity)
Evaluates resource productivity—generating maximum output with minimal carbon intensity.
The Analogy: Fuel economy in a vehicle—extracting maximum output while burning fewer raw resources, mitigating regulatory transition risks.
Rating Classifications:
High Resource Productivity (EEF): Low carbon intensity and superior resource stewardship.
Standard Intensity: Traditional operational footprint meeting baseline compliance.