10/10 score: the 10 quality criteria for a stock

2026-06-12 · By Lubin Danilo, founder of Lubin Investment

The /10 score measures a business's solidity on ten objective financial criteria: profitability, revenue and cash-per-share growth, share count discipline, FCF margin, margin expansion, return on capital, debt control, earnings conversion, and collection cycle. A 10/10 means all ten boxes are checked. Quality and price always remain two separate questions.

• 10 objective criteria (pass or fail): profitability, revenue growth, cash-per-share growth, share count control, FCF margin, margin expansion, Cash ROCE, debt load, earnings conversion, collection cycle.
• Each criterion passed = 1 point. The /10 score is the total. A 10/10 means all ten boxes are ticked.
• The score measures business quality independently of price. The P/FCF ratio comes next, as a separate step.
• A high score reduces risk but does not decide the buy: a 10/10 company can still be overvalued.

Why rate the business before looking at its price

Most investors confuse two distinct questions: is this business solid? And: is it cheap today? Mixing them is the most frequent investing mistake. A stock that looks cheap can hide a business in structural decline. A stock that looks expensive can multiply its value over the years if cash keeps growing. The first question must be answered on its own, before worrying about the price.

To avoid relying on gut feeling, I defined ten precise financial criteria, each with a clear threshold. The company either passes or it does not. The /10 score is simply the count of criteria passed. It does not depend on the news cycle, the hot sector of the moment, or my view on management: just verifiable numbers. The screener does this automatically for over 5,000 stocks.

The five profitability criteria

The first five criteria answer one question: is this an efficient cash machine? Here is each one in detail, with the thresholds and the reasons behind them.

Criterion 1: is the company profitable?

The first filter is simple: the company must earn a positive net profit. Net margin is what remains from each euro of sales after paying everything (costs, wages, taxes, interest on debt). The threshold is modest, but it eliminates companies that have been burning cash for years with no path to profitability. SkyWest (SKYW), a regional airline, posts a 10.4% net margin, solid for a sector with heavy fixed costs. Kinsale Capital (KNSL), a specialty insurer, reaches 28.2%.

Criterion 2: are revenues growing fast enough?

A shrinking business will eventually cause problems. The criterion requires at least 10% annual revenue growth over five years. This filters out structurally declining companies but is achievable for a good business in an expanding market. Kinsale Capital grows at 33% per year. SkyWest hits 10.1%, just above the threshold. Microsoft, at 13.5% annual growth, passes this comfortably.

Criterion 3: is cash per share growing?

This criterion is more demanding. It measures the growth of free cash flow per share: the cash the company generates every year divided by the share count. Free cash flow is the money that genuinely stays in the bank once every bill is paid (wages, equipment, taxes, capital spending) and is harder to manipulate than accounting profit. The threshold is +10% per year over five years.

SkyWest achieves 16.1%. Microsoft, with its heavy artificial intelligence investments, reaches only 4.8%, less than half the threshold: that is one of its two failing criteria. When cash per share stalls, the future return for shareholders is limited even if revenues rise.

Criterion 4: is the share count under control?

When a company issues new shares to pay employees or fund acquisitions, it dilutes existing shareholders. Your slice of the pie shrinks even if the pie grows. This criterion checks that the share count is not spiralling upward. Ideally the company buys back its own shares: SkyWest reduces its share count by 5.4% per year, concentrating value in those who stay. Kinsale Capital is stable at +0.18% per year, which is acceptable.

Criterion 5: is the cash margin solid?

FCF margin measures how many euro cents of free cash flow are left from each euro of sales. Most companies struggle to exceed 10%, which is the criterion threshold. SkyWest generates 20.8 cents of free cash per euro of revenue, despite heavy fuel and maintenance costs. Kinsale Capital reaches 51.9%, exceptional for an insurer. A high FCF margin often signals a genuine competitive moat: if rivals could copy the model, they would already have done so.

The five durability criteria

The last five criteria answer a second question: can this business hold up over time, even through a rough patch? Here is how each one is evaluated.

Criterion 6: are margins expanding?

This criterion measures operating leverage: when sales rise, do margins improve too, or do costs eat all the surplus? A business with strong operating leverage sees profits grow faster than its revenues. It is the sign of a scalable model that does not need to hire proportionally as it grows. Both SkyWest and Kinsale Capital pass this criterion: their margins widened over five years despite shocks.

Criterion 7: is capital well deployed?

Cash ROCE (return on capital employed) measures how much cash the company generates for each euro invested in the business. The threshold is 15%: for every 100 euros of capital, the company must generate at least 15 euros of free cash per year. A high Cash ROCE usually reflects a durable competitive moat. SkyWest hits exactly 15%. Kinsale Capital reaches 45.4%, remarkable.

Criterion 8: is the debt manageable?

Debt is measured here in years of free cash flow needed to repay all net debt. If the company generates 100 million in cash per year and carries 200 million in net debt, that is two years. The threshold is three years. Below that, the debt stays manageable even if results temporarily weaken. SkyWest sits at two years, appropriate for an asset-heavy sector. Kinsale Capital has virtually no net debt: zero years.

Criterion 9: do profits become real cash?

An accounting profit that does not convert into real cash is a warning sign. The CCR (cash conversion ratio) measures whether net profits correspond to actual free cash. A ratio of 1.0 means each euro of profit equals one euro of free cash. Above 1.0 is even better: conservative accounting. SkyWest scores 2.0. Kinsale Capital scores 1.89. Microsoft sits at just 0.48: less than half its profits convert to free cash, because its AI investments consume everything else. That is its second failing criterion.

Criterion 10: does the company collect cash before it pays?

The CCC (cash conversion cycle) measures in days how long it takes from spending money to collecting it. The shorter, the better. A negative CCC is rare and valuable: the company collects from customers before paying its suppliers. This is the Costco or Amazon model. SkyWest posts a CCC of minus 42 days, remarkable for an airline: tickets are paid well before the fuel and maintenance bills arrive.

Two 10/10 companies side by side

• SkyWest (SKYW), regional airline: 10/10. Net margin 10.4%, FCF margin 20.8%, cash per share +16.1%/yr, share buybacks (-5.4%/yr), Cash ROCE 15%, debt at 2 years of FCF, CCR 2.0, CCC -42 days. Priced very cheaply: P/FCF 4.3× (four years of cash).
• Kinsale Capital (KNSL), specialty insurer: 10/10. Net margin 28.2%, FCF margin 51.9%, revenues +33%/yr, cash per share +28.2%/yr, stable share count, Cash ROCE 45.4%, virtually no debt, CCR 1.89. Reasonably priced: P/FCF 7.2×.
• Microsoft (MSFT): 8/10. Two criteria fail: cash per share +4.8%/yr (threshold 10%) and CCR at 0.48 (AI investments absorb the rest). Net margin 39%, revenues +13.5%/yr. Priced very expensively: P/FCF 49.7×.

What a 10/10 score does not guarantee

The score measures business solidity, not whether now is the right time to buy. A 10/10 company can trade at 80 times its annual cash: all ten criteria are green, but you are paying so much that future returns will be modest. Conversely, a 7/10 company at 2 times its cash may be a bargain: the imperfect criteria are probably already priced in, and the low price more than compensates.

That is why I always look at two things separately. The /10 score first: is this a good business? Then the P/FCF (share price divided by annual free cash flow): a low P/FCF means the market is asking for few years of cash; a high P/FCF means betting on strong future acceleration. The score without the price does not tell you if it is a bargain. And the price without the score can hide a deteriorating business.

How I use these criteria in practice

I always start by filtering on score: I target 10/10 or 9/10. Out of 5,000+ stocks analysed, fewer than 80 pass. That is intentional. These 80 companies have cleared a bar that protects them from ordinary shocks. Among these 80, I look for those whose P/FCF is still reasonable: that is where most of the potential concentrates.

SkyWest at P/FCF 4.3× is priced very cheaply: you pay four years of cash for a well-run machine that buys back its shares and generates 20% FCF margin. Kinsale Capital at 7.2× is reasonable for a company growing at 33%/yr. A 10/10 company at P/FCF 60× would require very strong conviction about future acceleration, because the market has already priced in everything. The score builds my candidate list. The P/FCF helps me choose among them. That is what I built this site to do in seconds for any stock.

FAQ

Does a 10/10 score mean you should buy the stock?

No. The score only measures business solidity: profitability, growth, debt, cash. It says nothing about price. A 10/10 company can be overvalued. The next step is always to look at the P/FCF (share price divided by annual free cash) and compare it to a fair buy price.

What happens if a company fails just one criterion?

It gets a 9/10, still a very strong score indicating a solid business on almost every dimension. A single failing criterion can be structural (some criteria are not calculable for banks or insurers) or temporary (a weaker growth year). I always check which one failed and why before drawing conclusions.

Do these criteria work for all companies?

For most, yes. For financial sectors (banks, insurance) some criteria like the collection cycle (CCC) cannot be calculated and are adapted or skipped. For unprofitable start-ups, the profitability criterion filters them out immediately. Our framework targets mature cash-generating businesses: that is the kind of company I look for.

What is the difference between the /10 score and the P/FCF?

The /10 score assesses business quality independently of the market. The P/FCF (price-to-free-cash-flow) assesses the price the market is asking: how many years of cash you agree to pay. The two together form the investment decision. The /10 score alone is like evaluating the quality of a house without looking at its price.

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).