Company-specific scores will be recalculated with the new weights the next time the company is analyzed.
These adjustments were made in a quixotic effort to improve the correlation between the Overall Gauge score and future stock price gains. The selection of weights is as much art as science. We typically take a fresh look at the weights when the set of metrics used for a particular gauge are revised, as we recently did on a trial basis for the Cash Management gauge.
We should probably consider weights that vary by industry, since it seems clear that some parameters are more relevant to some industries than others. We could also consider weights that vary with market capitalization, growth vs. value, etc.
We also make occasional revisions to the equations that convert the ratios listed below into point scores.
| Cash Management (20%, was 15%) | Previous Weight | Current Weight |
| 10 | 5 | |
| 10 | 10 | |
| 40 | 20 | |
| 30 | 17.5 | |
| 10 | 5 | |
| N/A | 10 | |
| N/A | 10 | |
| N/A | 22.5 | |
| | | |
| Growth (10%, was 15%) | | |
| 10 | 10 | |
| 40 | 40 | |
| 20 | 20 | |
| 30 | 30 | |
| | | |
| Profitability (30%, was 25%) | | |
| 20 | 25 | |
| 20 | 10 | |
| 25 | 40 | |
| 35 | 25 | |
| | | |
| Value (40%, was 45%) | | |
| 10 | 10 | |
| 40 | 30 | |
| 25 | 40 | |
| 25 | 20 | |
| | | |
A few additional comments. We increased the weight of the Cash Management score because three new parameters make it a more robust indicator of corporate health. We trimmed the weight of the Growth gauge because it hasn't correlated well with future stock price performance, which we find counter-intuitive. Perhaps sales and earnings growth are so widely analyzed that they get reflected in stock prices immediately, losing any predictive power they might have had. Or, perhaps the growth metrics we track are reflecting growth by acquisition, which often disappoint, rather than the growth by innovation.
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