Almost perfect stocks: what the missing criterion changes

2026-06-22 · By Lubin Danilo, founder of Lubin Investment

A 9/10 means one fundamental criterion fails: slightly slowing growth, a marginally stretched balance sheet, or insufficient buybacks in one year. In practice, a 9/10 remains an excellent company. The real difference for stock-picking often comes from valuation, not just the missing point.

• Our screener evaluates 5,000+ stocks on 10 fundamental criteria: ROIC, free cash flow growth, FCF margin, balance sheet strength, share buybacks, and more.
• A 10/10 means all 10 criteria are met simultaneously. This is rare: BSY, ROP, ASML, and PYPL are examples.
• A 9/10 means only one criterion falls short. AYI (Acuity Brands) and PAYX (Paychex) are good examples.
• The difference in actual quality is nuanced: a 9/10 is often an excellent stock.
• Valuation (P/FCF) matters as much as the score: an expensive 10/10 can underperform a well-valued 9/10.

Our scoring method in 30 seconds

At lubin-investment.com, I analyze stocks using 10 quantitative fundamental criteria. The idea is straightforward: rather than reading dozens of pages of annual reports, I want an objective and reproducible rating that lets me compare 5,000 stocks on equal footing.

The 10 criteria cover the key dimensions of business quality. Here is what they measure:

• High ROIC (Return On Invested Capital): does the company generate significant value for every dollar invested in its operations? An ROIC above 15% is a strong signal.
• Regular free cash flow growth: are free cash flows growing year over year without too much volatility?
• High FCF margin: what share of revenue converts into real cash for shareholders?
• Clean balance sheet: is debt reasonable relative to earnings? Net debt below 3x EBITDA is a common benchmark.
• Regular share buybacks: is the company reducing its share count, mechanically increasing each shareholder's stake?
• Consistent profitability: is the company durably profitable, without loss-making years?
• Revenue growth: is the commercial engine progressing over the long term?
• Stable or improving operating margin: does operating profitability hold up despite competition and inflation?
• Predictable results history: are reported results consistent and free from major surprises?
• Long-term shareholder value creation: do dividends, buybacks, and reinvestment create lasting wealth?

Each criterion is evaluated in binary fashion (met or not). The final score is simply the number of criteria met. A 10/10 means all 10 boxes are checked simultaneously. That is rare, and precisely why it is interesting.

What separates a 9/10 from a 10/10

The difference between a 9/10 and a 10/10 comes down to a single failing criterion. But which one? And why does it matter? Here are the most common scenarios.

Slightly irregular free cash flow growth is the number one reason. An excellent company can go through a difficult year: an integrated acquisition, an exceptional investment, or a cyclical sector downturn. FCF drops once while the structural quality of the business remains intact. The result: 9/10 instead of 10/10. That is not a catastrophe.

A slightly stretched balance sheet is another common cause. If net debt slightly exceeds the threshold (say, 3.2x EBITDA instead of 3x), the clean balance sheet criterion is not validated. But the company remains solid. That slight overshoot may reflect a well-executed recent acquisition rather than a fundamental problem.

Insufficient buybacks in one year is the third typical case. Some companies buy back heavily in certain years and less in others. If the average remains favorable but one year falls below the threshold, the criterion is not validated for that period.

The key takeaway: moving from 9/10 to 10/10 does not necessarily signal a major qualitative break. It mainly signals that the company meets all its criteria simultaneously, which is a sign of very high consistency and operational discipline. It is demanding, and it is normal that few companies achieve it.

Concrete examples from our screener

Let us look at real examples to make the distinction concrete.

Acuity Brands (AYI) is rated 9/10 in our screener with a P/FCF of 19.6×. It is an American manufacturer of intelligent lighting solutions. ROIC is high, FCF margin is solid, the balance sheet is reasonable, and share buybacks are consistent. The missing criterion is likely related to growth: the industrial lighting sector experiences cyclical demand, and FCF growth has not been perfectly regular across all periods. Yet this is a very good company.

Paychex (PAYX) is rated 9/10 with a P/FCF of approximately 18×. Paychex is one of the leading payroll and HR management providers for American SMEs. Recurring model, excellent margins, solid balance sheet. The missing criterion is subtle, perhaps a slight irregularity in FCF growth during a specific period. It does not challenge the solidity of the model.

Bentley Systems (BSY) is rated 10/10 with a P/FCF of 22×. It is an infrastructure software publisher (bridges, roads, industrial buildings). Regular growth, high ROIC, structurally strong FCF margin, controlled balance sheet, consistent share buybacks. All 10 criteria are met simultaneously. The valuation at 22× is moderate for this quality level.

Roper Technologies (ROP) is rated 10/10 with a P/FCF of 14×. Roper is a niche industrial conglomerate specializing in software and instrumentation. Disciplined acquisition-driven growth model, very consistent FCF, high margins, controlled balance sheet. At 14× FCF, it is one of the least expensively valued 10/10 stocks in the screener.

For stock-picking, does it really change much?

The honest answer is: not as much as you might think. And that is one of the important nuances to understand if you want to use this screener intelligently.

A well-valued 9/10 can very easily outperform an expensive 10/10. A theoretical example: a 10/10 company valued at 50× its FCF versus a 9/10 company valued at 15× its FCF. If both have similar growth, the second offers a much greater margin of safety and a higher return potential. The score reflects quality, but performance also depends on the price you pay.

ASML illustrates this perfectly. It is a 10/10: the uncontested world leader in semiconductor lithography, with a near-unbreachable moat. But at 51× FCF, the valuation already incorporates a great deal of optimism. An investor buying ASML today pays a very high premium for that quality. That is not necessarily a mistake, but it is a point to consider seriously.

Conversely, PayPal is rated 10/10 and is valued at only 8× its FCF. The fundamental quality is there, and the market applies a severe discount for perceived reasons (growth slowdown, wallet competition). That is exactly the configuration I look for: high quality, low valuation.

A score of 9/10 or 10/10 is therefore a minimum quality filter, not a performance guarantee. It tells you the company is solid. But future returns also depend on the price at which you buy today.

The real question: quality and valuation combined

My method rests on two inseparable pillars: fundamental quality (measured by the score out of 10) and valuation (measured by P/FCF). A stock that meets both criteria simultaneously is what I prioritize.

A 10/10 with a P/FCF below 20× is a rare and attractive configuration. Roper Technologies (ROP) at 14× is a good example. A 9/10 with a P/FCF below 20× is also very interesting: the slight score imperfection is largely offset by the margin of safety provided by the valuation.

In practice, here is how I use these two dimensions together:

• Score 10/10 + low P/FCF (< 20×): ideal configuration, maximum priority.
• Score 10/10 + high P/FCF (> 40×): undeniable quality, but the valuation requires patience or very sustained growth to justify the price.
• Score 9/10 + low P/FCF (< 18×): very interesting. The missing criterion is often minor, and the valuation provides a real margin of safety.
• Score 9/10 + high P/FCF (> 35×): worth monitoring, not worth rushing into.
• Score < 7/10: I do not spend time here, regardless of valuation.

The screener available at <a href="/screener">lubin-investment.com/screener</a> lets you filter stocks by score and P/FCF simultaneously. That is where the 9/10 vs 10/10 distinction becomes most useful: by combining both dimensions, you quickly identify the opportunities worth analyzing first.

Want to go deeper on a specific stock? The <a href="/analyser">individual analysis tool</a> breaks down all 10 criteria one by one, shows you which one fails and why, and gives you the current P/FCF with historical context. It is the most efficient way to understand why a stock scores 9/10 rather than 10/10.

FAQ

What does a 10/10 mean in your screener?

A 10/10 means the company simultaneously meets all 10 fundamental criteria: high ROIC, regular free cash flow growth, high FCF margin, clean balance sheet, consistent share buybacks, durable profitability, revenue growth, stable operating margin, predictable results, and long-term shareholder value creation. This is rare: among 5,000+ stocks analyzed, only a small minority reaches this score.

Is a 9/10 really inferior to a 10/10?

Not necessarily in terms of actual quality. A 9/10 means one criterion is not met, often for a one-off reason: a year of slightly lower FCF, temporarily high debt, or insufficient buybacks in one year. The qualitative difference can be very small. What matters equally is valuation: a well-valued 9/10 can outperform an expensive 10/10.

Why is ASML rated 10/10 when it is so expensive?

The score measures fundamental quality, not valuation. ASML meets all 10 criteria: very high ROIC, regular FCF growth, exceptional FCF margin, solid balance sheet, share buybacks. Its P/FCF around 51× reflects a very high quality premium. The score and valuation are two separate dimensions in our method.

How do I find highly rated and well-valued stocks?

The screener at lubin-investment.com lets you filter simultaneously by score (e.g., only 9/10 and 10/10) and by P/FCF (e.g., below 20×). The combination of both creates the most interesting opportunities. You can then analyze each stock individually to understand which criterion is missing and why.

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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).