Many platforms only provide access to financial data. Scrab allows you to use financial data and your individual approach to finding, analyzing, and selecting companies for your portfolio with scoring models.
Why are scoring models important?
Scoring Models is how you tell Scrab what is important when researching companies. Scoring Models are also crucial for company comparisons, tracking scoring changes, or backtesting. While some Scrab tools don't require a detailed scoring model, having one tailor your experience across all functionalities. Don't worry if you're starting out; we've got ready-made models to get you going, and they can be easily edited to match your criteria as you go.
How do scoring models work?
Go to the Scoring Model support section for a detailed practical description of how to set up and configure your individual scoring model.
A scoring model can be as simple as looking for companies with metrics that matter most to you.
For example:
I want to find companies with high long-term EPS growth prospects, with low P/E ratios, or both.
In both cases, you need to define two things for each metric:
- What do the "high" and "low" mean for you? What is the threshold for growth being "high," in your opinion?
- How important are both criteria in relation to each other? Is one metric more important than the other to you?
Both definitions can (and should) be number-based, for example:
- If High growth for you means > 30 percent EPS growth per year on average, and low P/E means < 15
- If Growth is twice as important for you over P/E, and you wanted to use a range of '0-100' points, then you would give it 66,66 points (66,66% of the total score available), and if the P/E is < 15, then give it 33,33 points more (33,33% of the total score available).
After updating your criteria in Rule Settings, if Scrab finds a company that matches your criteria in full (growth > 30 and P/E < 15), then you will see the total company score equal to 100 points (100% of the total score available). On the other hand, let's suppose one of the parameters is not met. For example, growth equals 28 percent yearly, but P/E is still lower than 15. Scrab would score this company slightly lower in that case, giving it only 95% of the total score.
Keep in mind that the above is just an example, and all points and total scores are fully customizable at any time. Additionally, Scrab continuously monitors any metrics changes, ensuring your scoring model is immediately updated to reflect any changes. (Read about alerts here.)
How do you build a good scoring model?
With over 500 indicators available on Scrab, identifying which metrics matter most to you is key. This allows Scrab to tailor its analysis to your investment preferences, automating the process to deliver personalized results.
If you're starting out, as a best practice, an effective scoring model should incorporate a wide range of crucial factors.
These can include:
- Stock Valuation Metrics: P/S (Price to Sales), P/E (Price to Earnings)
- Analyst sentiment Metrics: Upside, Price Target changes
- Growth Forecast Metrics: Revenue, Net Income, Cash flow predictions
- Financial Health Indicators: Solvency, Liquidity ratios, Debt levels, Operating margins, RO
This article explains how to build your first simple scoring model.
Using our pre-configured models
We've set up some pre-configured scoring models in your account to help you get started quickly with Scrab. These models offer a solid foundation and are fully customizable, allowing you to adjust them according to your investment strategy or even use them as inspiration to create your own unique model. This way, you can dive into using Scrab without building everything from scratch.
If you want to know more, read our article on How to use predefined scoring models.