Our Approach

Our Methodology

9 proprietary ratings. 25 years of validation. One mission: measure what Wall Street won't measure — the statistical probability and magnitude of stock price changes.

The Science Behind Our Ratings

Every rating we produce is built on a simple premise: the relationship between a stock's price and its underlying value is measurable. When that relationship becomes distorted, the probability of future price change increases.

We don't predict prices. We measure probabilities. There's a profound difference. When we rate a stock "F", we're not saying it will fall. We're saying historical data across thousands of similar situations shows an elevated probability and magnitude of loss.

"The price alone is not what's material — it's how price relates to a company's historical valuation. When that relationship becomes distorted, we can measure the probability and magnitude of its reversion."

— Ray Mullaney, Founder

What Makes Our Approach Different

Auditable Process

Every rating is documented, timestamped, and traceable. Fiduciaries can cite our analysis as independent third-party validation.

We Measure, Not Predict

Our ratings quantify statistical probability based on historical patterns across decades of data — not analyst opinions about future events.

Zero Conflicts

No investment banking fees. No advertising revenue from funds. Our only business is selling ratings that work.

Full Disclosure

We publish our validation methodology and results. We welcome third-party audits. We don't hide behind "proprietary black boxes."

Our 9 Proprietary Ratings

Each rating measures a distinct dimension of risk. Together, they provide a complete picture of a company's risk profile.

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PRI
Price Risk Indicator™

A measure and rating of the statistical probability and magnitude of a stock's future price changes.

Price probability analysis

Measures the statistical probability and magnitude of future price changes by analyzing how much value an investor is receiving per dollar of market capitalization. The PRI evaluates whether current valuation ratios — particularly relative to the company's own historical norms — suggest the stock is priced at a premium, at fair value, or at a discount.

  • Compares current valuation levels against the company's own long-term history to identify distortions
  • Uses market capitalization as the aggregate measure of price paid by investors
  • Assesses value through revenue-based metrics such as price-to-sales and price-to-equity
  • Flags stocks where current pricing requires historically unusual or unsustainable assumptions to justify
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LI
Loss Indicator™

A measure of a company's liquidity, financial strength, and durability.

Critical for loss prevention

Identifies stocks with an elevated probability of significant long-term loss by examining a company's financial condition and operational stability. Unlike most ERS ratings, the Loss Indicator is especially powerful on the negative tail — its greatest value lies in flagging companies where the risk of substantial, lasting capital impairment is highest.

  • Evaluates liquidity: whether the company holds sufficient current assets and cash to meet its obligations
  • Assesses solvency: how burdened the company is by debt relative to its assets and its capacity to generate income
  • Measures the consistency of the company's growth history — stable, predictable growth signals durability, while volatile swings in revenue signal elevated risk
  • Most actionable as a warning system for stocks where the probability of significant loss is greatest
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FSN
Fiduciary Stock Navigator™

A rating of both the financial condition and valuation of a stock.

Composite fiduciary rating

The most comprehensive rating in the ERS system, combining both valuation analysis and fundamental financial assessment into a single composite score. The FSN merges the perspectives of the PRI and the Loss Indicator, giving fiduciaries a unified view of whether a stock is both reasonably priced and financially sound.

  • Integrates valuation measurement (from the PRI) with financial condition analysis (from the LI) into one rating
  • Historically demonstrates the strongest propensity for gains among A+ rated stocks
  • Also the most reliable rating for identifying stocks to avoid — F-rated FSN stocks have the worst historical outcomes
  • Designed specifically to support fiduciary decision-making, where both overpaying and owning financially fragile companies can breach duty-of-care standards
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4D
4 Dimensions of Risk™

Measures risk across four core dimensions — solvency, valuation, profitability, and tangible equity — to quantify the overall probability and magnitude of loss.

Multi-dimensional analysis

Quantifies risk across four core dimensions — solvency, valuation, profitability, and tangible equity — with particular emphasis on how valuation interacts with a company's profitability and the quality of its equity. The 4D rating provides a multi-dimensional view that captures risks a single-metric approach would miss.

  • Measures valuation specifically through the lens of profitability and tangible equity, not just price ratios alone
  • Examines solvency to assess whether the company's financial structure can withstand stress
  • Evaluates the quality and composition of equity, focusing on tangible assets with verifiable value
  • Integrates all four dimensions into a single score that reflects the overall probability and magnitude of loss
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V1
Valuation Metric 1™

Indicates whether valuation is low, middling, or high relative to its past.

Historical valuation context

A focused, single-dimension rating that answers one question: Is this stock a bargain or a premium right now? V1 is the closest-to-the-ground valuation signal in the ERS system — it does one thing and does it well, giving investors an immediate read on whether current pricing represents a favorable or unfavorable entry point relative to the company's history.

  • Indicates whether current valuation is low, middling, or high compared to the company's own historical range
  • Designed as a pure valuation signal with no additional financial condition or stability components
  • Especially useful for timing decisions — identifying when a stock is historically cheap or expensive
  • Provides the most direct, unblended read on valuation of any ERS rating
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eLiq
eLiquidity™

Evaluates short-term financial flexibility using objective liquidity ratios such as the current ratio, quick ratio, and cash ratio.

Short-term flexibility

Evaluates a company's short-term financial flexibility by examining how readily it can meet its obligations with available liquid assets. The eLiquidity rating goes beyond standard liquidity ratios to consider liquid tangible equity — the cash remaining after all debts are paid — which effectively reduces the real price an acquirer would pay for the business.

  • Analyzes standard liquidity measures including the current ratio, quick ratio, and cash ratio
  • Incorporates liquid tangible equity: the residual cash value after all debts are satisfied
  • Companies with high liquid tangible equity effectively offer a valuation cushion — surplus cash reduces the true cost of ownership
  • Identifies companies that may appear solvent on paper but lack the liquid assets to weather near-term stress
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eStr
eStrength™

Assesses the company's underlying financial strength by examining balance-sheet quality, leverage, and stability of financial resources.

Balance sheet quality

Assesses whether a company is financially strong or weak at this moment by examining its balance sheet quality, debt burden, profitability, and the composition of its equity. The eStrength rating focuses on tangible equity — assets with known, verifiable values — rather than intangibles whose worth may be difficult to quantify.

  • Evaluates debt ratios to determine how leveraged the company is relative to its capacity to service that debt
  • Examines current profitability and margin health as indicators of financial resilience
  • Focuses on tangible equity — assets with stated, verifiable values — rather than intangibles like goodwill or patents that are harder to value precisely
  • Provides a point-in-time snapshot of fundamental strength, answering whether the company is on solid footing right now
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eDur
eDurability™

Measures the consistency and resilience of revenues, margins, and business performance over time.

Performance consistency

Measures the consistency and trajectory of a company's financial performance over time by analyzing growth rates across key metrics. The eDurability rating distinguishes between companies moving in the right direction and those deteriorating — making it a forward-looking indicator of business momentum and resilience.

  • Evaluates whether revenues are growing or shrinking over time
  • Tracks the trajectory of equity — is the company building value or eroding it?
  • Monitors debt trends — shrinking debt signals strengthening; growing debt signals risk
  • A company with growing revenues, growing equity, and shrinking debt scores well; the reverse pattern signals the company is moving in the wrong direction
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eVal
eValuation™

Quantifies the statistical relationship between current valuation metrics and long-term fundamentals to estimate downside risk and potential valuation compression.

Valuation risk assessment

Quantifies the relationship between current valuation metrics and long-term fundamentals to estimate downside risk and potential valuation compression. The eValuation rating shares a common foundation with the PRI — both measure whether investors are overpaying — but eValuation examines the question through a broader set of valuation lenses, including earnings-based metrics.

  • Assesses valuation using multiple measures including price-to-sales, price-to-equity, and price-to-earnings
  • Compares current valuation ratios against the company's own historical norms to identify overextension
  • Estimates the magnitude of potential valuation compression if pricing reverts toward historical levels
  • Complements the PRI by incorporating earnings-based valuation measures that the PRI does not use

All 9 ratings operate on a scale of +150 (best) to −250 (worst)

A+ / A
Excellent
B
Good
C
Medium Risk
D
Med-High Risk
E
High Risk
F
Very High Risk

How Our Ratings Work

1

Fact-Based Inputs

We use objective data only: SEC filings (income statement, balance sheet, cash flow) plus market price history. No forecasts, estimates, or analyst adjustments.

2

Structured Data + Consistent Calculations

We standardize the raw filings and compute a consistent set of measures that reflect financial condition and valuation (for example: liquidity, leverage, profitability, tangible equity, and valuation multiples).

3

Company-Specific Context

Each company is evaluated primarily against its own long-term profile. We focus on what's normal for that business over time, so the rating reflects the company's reality, not a generic template.

4

Standardized Scoring That Supports Probability Studies

Our 9 ratings translate today's conditions into standardized numeric scores that are comparable across companies and time. Because the scoring is consistent, we can study historical frequencies and typical outcome ranges for similar rating profiles.

5

Clear Grades + Daily Updates

Scores are calculated as number grades from +150 (best) to -250 (worst), then converted into letter grades (A+ through F) for clarity. Ratings are updated daily, and they refresh whenever new data is added to our database.

We Welcome Independent Audit

Choose any 2 of our 9 proprietary ratings. Submit them to McKinsey, PwC, or Deloitte for independent verification under strict NDA. We'll cooperate fully.

We don't hide behind "proprietary black boxes." Our methodology is documented, our validation is transparent, and our results are auditable. That's what independence means.

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