AI-Powered Composite Stock Scoring Methodology

Each company’s score is built from nine normalized financial metrics, weighted to reflect profitability, health, valuation and growth:

• Profitability (35%)
  • ROCE (Return on Capital Employed) and ROE (Return on Equity) are converted from percentages to a 0–1 scale by dividing by 100.
  • Net Profit is log-scaled (log₁₀)so large profits don’t dominate—and capped at 100,000 Cr (i.e. log₁₀=5), then scaled to 0–1.
• Financial Health (30%)
  • Debt/Equity is inverted via 1/(1 + D/E), so lower leverage scores nearer 1.
  • Current Ratio is capped at 5:1 (anything above is set to 5), then divided by 5 to get 0–1.
  • Interest Coverage is capped at 10×, then divided by 10.
• Valuation (20%)
  • Price / Intrinsic Value is inverted with 1/(1 + P/I), so cheaper stocks score closer to 1.
• Growth Indicators (15%)
  • Promoter Change (% change in promoter stake) is divided by 100.
  • Sales vs. Profit Bonus: +0.05 if the latest quarter’s sales exceed the 3-year average annual profit.

Putting it all together:

Final Score = 0.15×ROCE_norm + 0.10ROE_norm + 0.10×NP_norm + 0.15×DE_norm + 0.10×CR_norm + 0.05×IC_norm + 0.20×Val_norm + 0.10×Prom_norm + 0.05×GrowthBonus

Weights summary: Profitability 35% • Health 30% • Valuation 20% • Growth 15%

⚠️ Disclaimer: This content is for educational purposes only and does not constitute investment advice. Please ensure compliance with SEBI guidelines.