StockSemáforo uses a transparent, deterministic rule-based system: no black boxes. Each stock is scored from 0 to 100 across four areas. The overall score gives more weight to valuation —the "cheap or expensive?" question— than to the average of quality (growth, profitability and solidity). The fundamentals come from the official reports companies file with the U.S. SEC (EDGAR), which are in the public domain; you add the current price.
This area needs the current price, which you enter (we link you to Google Finance). With it we compute the P/E (price/earnings) and, instead of judging it against a fixed threshold, we compare it with the normal P/E of its sector: trading well below that reference scores high; well above, low. So a P/E of 30 isn't penalized the same in software (where it's normal) as in banking (where it's expensive). We don't use the PEG: that indicator usually relies on expected growth (the company's guidance), and we work only with published data. Real growth is already rewarded in its own area, so we don't count it twice. Without a price, this area doesn't score and the grade rests on the other three.
Average of the annualized growth (about a 3-year CAGR) of earnings per share and of revenue. We use several years, not the last one, so we're not fooled by a single exceptionally good or bad year —typical in cyclical sectors—. Growing 30% a year or more scores 95; flat, around 30; declining, less.
Combines net margin (25%+ is excellent), gross margin (60%+ signals pricing power) and ROE. We cap ROE at 40%: above that it usually reflects leverage or aggressive buybacks (which shrink equity), not more real quality.
Net debt/EBITDA (below 0.5x is strength; above 4x, risk) and free cash flow margin (20%+ is elite; negative is a warning sign).
The sector P/E reference is an approximation based on the company's classification, not a live market average. The growth, margin and debt thresholds are still general. The system doesn't assess qualitative factors (competitive advantages, management, regulatory risks). For companies without profits, the P/E doesn't apply. Fundamentals are computed over the last twelve months (TTM): we combine the latest closed fiscal year with the most recent quarters, so they reflect the current situation, not that of a year ago. That TTM may include one-off items (charges or gains) that distort a specific period. And in companies with several share classes, EPS may not be available (enter it by hand). Use the traffic light as a first filter, never as a final decision.
This tool is educational and does not constitute financial advice.