VM Score - Individual Stock Scoring
The VM Score is our simplified, gamification-friendly scoring system that evaluates every stock on three fundamental tests. It produces a single 0–100 score using absolute thresholds (not relative percentiles), making it easy to understand at a glance.
Formula
VM Score = Price Test (40%) + Quality Test (40%) + Safety Test (20%)
Each test scores 0–100 independently. The VM Score is a weighted average, resulting in a final 0–100 global ranking.
Price Test - Are You Being Paid Well?
Measures whether you're getting good value for what you pay. Uses absolute thresholds to score four key valuation indicators.
| Indicator | Top Score (100) | Interpretation |
|---|---|---|
| FCF Yield | ≥ 10% | Strong free cash flow relative to price |
| Earnings Yield | ≥ 10% | Inverse P/E - lower P/E = higher yield |
| Margin of Safety | ≥ 50% | Discount to DCF intrinsic value |
| EV/EBIT | ≤ 8x | Enterprise value relative to operating earnings |
Quality Test - Is This a Durable Business?
Evaluates the underlying business quality. A cheap stock isn't a good deal if the business is deteriorating.
| Indicator | Top Score (100) | Interpretation |
|---|---|---|
| ROIC | ≥ 25% | Return on invested capital - management efficiency |
| Gross Margin | ≥ 60% | Pricing power and competitive moat |
| FCF Conversion | ≥ 90% | FCF/Operating Cash Flow - earnings quality |
| ROIC Consistency | Low variability | Stability of returns over time |
Safety Test - Sound Foundation?
Checks financial health using three established academic models. Includes a hard floor: if the Beneish M-Score indicates potential manipulation (M > -1.78), the Safety Test is capped at 30.
| Indicator | Safe Zone | What It Measures |
|---|---|---|
| Piotroski F-Score | 8–9 / 9 | Financial strength across 9 accounting signals |
| Altman Z-Score | > 2.99 | Bankruptcy risk prediction model |
| Beneish M-Score | < -1.78 | Earnings manipulation detection |
Hard Floor: If Beneish M-Score > -1.78, the Safety Test is capped at a maximum of 30 points, regardless of how well Piotroski and Altman score. This protects against potential earnings manipulation.
VM Score vs VMCI - What's the Difference?
| Feature | VM Score | VMCI |
|---|---|---|
| Purpose | Quick quality check | Deep cross-stock comparison |
| Indicators | ~11 key metrics | 120 indicators |
| Scoring | Absolute thresholds | Cross-stock percentile ranking |
| Best for | Screening & leaderboard | Research & peer comparison |
| Scale | 0–100 (absolute) | 0–100 (relative) |
See the VM Score in Action
Every stock on ValueMarkers comes with a transparent VM Score you can verify yourself.