In my stock analyses, I reference ratings and rankings of several online sources, including ones I'm subscribed to. Below are descriptions of these systems, followed by an example for Apple Inc (AAPL).
The Dividend Advantage Rating System (DARS) is a proprietary dividend stock rating system available only to Dividend.com premium subscribers. Each stock covered is given a DARS rating of one to five stars, based upon five distinct criteria: • relative strength – is the stock trending up and trading above its 50- and 200-day moving averages? • overall yield attractiveness – current yield and the stock's ability to continue paying that dividend • dividend reliability – number of years and likelihood of continuing current dividend payments • dividend uptrend – history of regular dividend increases and likelihood of future dividend increases • earnings growth – indication of projected earnings for at least the next four quarters.
The Morningstar Rating for Stocks is calculated by comparing a stock's current market price with Morningstar's estimate of the stock's fair value. Under the system, 3-star stocks are those that should offer a fair return, one that adequately compensates for the riskiness of the stock. 5-star stocks should offer an investor a return that's well above the company's cost of equity. Conversely, low-rated stocks have significantly lower expected returns. The Morningstar Credit Rating uses 4 different scores in determining an overall credit rating, namely scores for Business Risk, Cash Flow Cushion, Solvency, and Distance to Default. The following ratings are assigned based on the assessed risk default level: • AAA – extremely low default risk • AA – very low default risk • A – low default risk • BBB – moderate default risk • BB – above average default risk • B – high default risk • CCC – currently very high default risk • CC – currently extreme default risk • C – imminent payment default • D – payment default
With S&P Capital IQ STARS (STock Appreciation Ranking System), analysts rank stocks based on forecasts of future total return potential relative the expected total return of the S&P 500, over the coming 12 months: • 5-Star (Strong Buy): expected to outperform the S&P 500 by a wide margin • 4-Star (Buy): expected to outperform the S&P 500 • 3-Star (Hold): expected to closely approximate the S&P 500 • 2-Star (Sell): expected to underperform the S&P 500 • 1-Star (Strong Sell): expected to underperform the S&P 500 by a wide margin. Growth and stability of earnings and dividends are deemed key elements in establishing the S&P Capital IQ Quality Ranking. The final score for each stock is measured against the scores of a large and representative sample of stocks. Scores map to the rankings ranging from A+ to D: • A+ – highest quality • A – high quality • A- – above average quality • B+ – average quality • B – below average quality • B- – lower quality • C – lowest quality • D – in reorganization
The Analyst Consensus Rating is based on the average rating consensus of all Wall Street analysts in the last 3 months. Premium subscribers can see the rating consensus of the best performing Wall Street analysts.
TheStreet Quant Ratings is a rating system that uses algorithmic and quantitative modeling to evaluate 32 different fundamental data factors and assigns a single letter grade from A+ to F to each stock. The letter grade considers risk and reward metrics and indicates the total return potential of a stock over the next 12 months.
Financial Strength Rating: Value Line classifies 1,700 companies’ Financial Strength ratings from A++ to C, in nine steps. The lowest grade is reserved for companies experiencing serious financial difficulty. Balance sheet leverage, business risk, the level and direction of profits, cash flow, earned returns, cash, corporate size, and stock price, all contribute to a company’s relative position on the scale. The amount of cash on hand, net of debt, is also an important consideration. The Safety Rank measures the total risk of a stock relative to the approximately 1,700 other stocks covered in The Value Line Investment Survey. The Safety Rank goes from 1 (highest) to 5 (lowest). Note that Value Line also provides Timeliness and Technical Ranks, which I don't use.
The Zacks Rank is a short-term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. Stocks rated 1-Strong Buyor2-Buy consistently outperform the S&P 500. Style Scores complement the Zacks Rank and allow users to focus on stocks that best fit their trading style, whether Value, Growth, or Momentum. The VGM score ('V' for Value, 'G' for Growth and 'M' for Momentum) combines the weighted average of the individual style scores into a single score.
Example: AAPL (15 August 2016)
Neutral (2.5 to 3.4)
Rating for Stocks:
STARS and Quality Ranking:
Rating and Rank:
Rank and Style Scores:
†VGM Style: Value Growth Momentum and combined VGM score