How the Conviction Score Works
The Apter Conviction Score is a composite 0–10 rating that synthesizes fundamental quality, valuation, growth trajectory, price momentum, and risk characteristics into a single defensible number.
The Five Pillars
Each stock is evaluated across five equally-structured pillars. Within each pillar, individual metrics are weighted and normalized against sector peers before being combined into a pillar score (0–10). Pillar scores are then blended using the weights shown below.
Quality
Weight: 25%Measures the durability and efficiency of the business. Higher-quality companies tend to sustain returns through cycles.
- Return on Equity (ROE)
- Return on Invested Capital (ROIC)
- Gross Margin
- Operating Margin
- Free Cash Flow Margin
- Asset Turnover
Value
Weight: 20%Assesses whether the current price offers a reasonable entry relative to earnings, cash flow, and book value.
- Price / Earnings (P/E)
- Price / Book (P/B)
- Price / Sales (P/S)
- EV / EBITDA
- Free Cash Flow Yield
Growth
Weight: 20%Captures the trajectory of revenue, earnings, and free cash flow over recent and multi-year periods.
- Revenue Growth (YoY)
- Earnings Growth (YoY)
- FCF Growth (YoY)
- Revenue 3-Year CAGR
- Earnings 3-Year CAGR
Momentum
Weight: 20%Evaluates price trend strength and positioning relative to key moving averages.
- Price vs. 50-Day SMA
- Price vs. 200-Day SMA
- RSI (14-day)
- 1-Month Return
- 3-Month Return
- 6-Month Return
Risk
Weight: 15%Penalizes stocks with excessive leverage, volatility, drawdown, or insufficient liquidity buffers.
- 30-Day Volatility
- Max Drawdown (1-Year)
- Debt / Equity
- Interest Coverage
- Current Ratio
- Beta
Risk Gates & Adjustments
After the composite score is calculated, the system applies hard caps and penalties for extreme risk conditions. These include excessive leverage, persistent negative free cash flow with high dilution, and extreme volatility or drawdown. Risk gates ensure that a stock cannot receive a high conviction score while exhibiting dangerous financial characteristics.
Score Interpretation
The overall score maps to one of four plain-language bands:
Confidence Score
Each conviction score is accompanied by a confidence percentage that reflects data completeness. Missing metrics, unavailable peer-group comparisons, and stale data reduce confidence. A score with low confidence should be interpreted with additional caution.
Update Frequency
Scores are updated regularly; frequency varies by data availability and market conditions. Fundamental data refreshes on quarterly reporting cycles, while momentum and risk metrics update more frequently as price data changes.
Time Horizon
The Conviction Score is designed for swing and position-level decision-making, not intraday trading. The fundamental pillars (Quality, Value, Growth) reflect medium-term characteristics, while Momentum captures weeks-to-months trend behavior.
Data Sources
The model draws from publicly available financial data including SEC filings, market price feeds, and derived analytics. All metrics are computed from objective, verifiable data points.
What It Is & What It Isn't
- A structured, quantitative framework for evaluating stocks
- An aggregation of publicly available fundamental and technical data
- A starting point for your own research and decision-making
- Transparent in its inputs and methodology
- Not a buy, sell, or hold recommendation
- Not personalized investment advice
- Not a guarantee of future performance
- Not a substitute for professional financial counsel