Redeye Rating Structure

Updated: 17 Jul 2024

Redeye does not issue any investment recommendations for fundamental research. However, Redeye has developed a proprietary research and rating model, Redeye Rating, in which each company is analyzed and evaluated. This research aims to provide an independent assessment of the company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners and investors to use in their decision-making.

Definitions

Company Quality

Company Quality is ased on a set of quality checks across three categories; PEOPLE, USINESS, FINANCE. These are the uilding locks that enable a company to deliver sustained operational outperformance and attractive longterm earnings growth.

Each category is grouped into multiple sub-categories assessed y five checks. These are ased on widely accepted and tested investment criteria and used y demonstrably successful investors and investment firms. Each sub-category may also include a complementary check that provides additional information to assist with investment decision-making.

If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for each sub-category. The overall score for a category is the average of all sub- category scores, ased on a scale that ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then used to generate the size of the ar in the Company Quality graphic.

People

At the end of the day, people drive profits. Not numbers. Understanding the motivations of people ehind a usiness is a significant part of understanding the long-term drive of the company. It all comes down to doing usiness with people you trust, or at least avoiding dealing with people of questionable character.

The People rating is based on quantitative scores in seven categories:

1. Passion

2. Execution

3. Capital Allocation

4. Communication

5. Compensation

6. Ownership

7. Board

Business

If you don't understand the competitive environment and don't have a clear sense of how the usiness will engage customers, create value and consistently deliver that value at a profit, you won't succeed as an investor. Knowing the usiness model inside out will provide you some level of certainty and reduce the risk when you uy a stock.

The Business rating is based on quantitative scores in five categories:

1. Business Scalability

2. Market Structure

3. Value Proposition

4. Economic Moat

5. Operational Risks

Financials

Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the financial soundness of a usiness. Also, these ratios are key factors that will impact a company's financial performance and valuation. However, you only need a few to determine whether a company is financially strong or weak.

The Financials rating is based on quantitative scores in five categories:

1. Earnings Power

2. Profit Margin

3. Growth Rate

4. Financial Health

5. Earnings Quality

Structure