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Finanzoo Methodology

Finanzoo GmbH aims to provide its users a key performance figure that stands out of the enormous available number of figures. The ultimate goal is to enable customers to compare shares regarding their fundamental and fair value. The Finanzoo FScore is calculated to serve as this key performance figure that includes all relevant available data in one figure. 

 

 

[Translate to English:] value investing

Calculation of the FScore

In order to calculate the FScore, the below listed fundamental data is being considered and the Finanzoo calculation is applied to find an individual score for each criterion. Firstly the Finanzoo algorithm calculates a score for each individual criterion. Secondly this score is being multiplied by the value of the category. The FScore is then the addition of all 6 categories where 100 is the highest possible score. 

[Translate to English:] Regeln Fundamentalanalyse

Key Performance Figures

1. Price-Cash-Flow Ratio --> 23%

2. Equity Ratio --> 20%

3. Return on Investment --> 17%

4. Price-Earnings Ratio --> 15%

5. Price-to-book ratio -->15%

6. Dividend history --> 10%

7. 50 points reduction in case of short term shares price fluctuation of more than 20%

[Translate to English:] Stock Picking

Selection of Key Performance Figures

The selection of key performance figures for the calculation of the FScore is limited to balance sheet figures. The key performance figures 1 (Price-Free-Cash Flow Ratio), 5 (Price-Earnings Ratio) and 6 (Price-to-Book Ratio) additionally include the current stock market price of the considered company. Chart techniques and projections are not being considered. The FScore also does not reflect any judgements about business models nor sectors apart from the Free Cash Flow. For example the Equity Ratio does not at all treat the banking sector any different from any other sector despite its usually very high share external capital. The interpretation of all results is always up to the individual user.  

[Translate to English:] Finanzoo Stock Screener

Finanzoo Advantages

Extreme short term share price fluctuations are being punished with a 50 points penalty in criterion 7. The reason for this is that based on a value driven analysis such extreme short term fluctuations might distort the evaluation and might lead into wrong decisions. 

The addition of all individual scores for all 6 criterions, minus possible penalties, lead into the final FScore for each share. 

A high FScore generally indicates undervalued share prices.

A low FScore generally indicates overvalued share prices. 

As a consequence Finanzoo users are being enabled to analyse and compare single shares in a quick and transparent way. An even more detailed analysis can be done by filtering for different sectors, countries and indices. 

[Translate to English:] Fundamentaldaten

Significance

The Finanzoo calculation for the FScore is mainly based on financial theories for stock valuation. Empiric studies are proving these methods.

This can also be seen following the performance of the Finanzoo sample portfolio. 

Worldwide value oriented investors are following this approach which is often referred to as a value investing method. 

However, for most investors the FScore will never be the only relevant key performance figure. Before taking an investment decision other criteria will be considered as well. But the FScore can be a valuable support for any kind of stock picking. Additionally the huge number of analyzed shares makes sure that also smallcap companies are being considered that otherwise might be left out by professional analysts. 

[Translate to English:] Fundamentale Kennzahlen

Conclusion

In summary the use of the Finanzoo analysis creates a huge time saving advantage during the stock picking and search process for undervalued shares. In addition it is a most welcome way of rule-based analysis of a big number of shares.