Understanding Fundamentals
Four pillars. Sixty-five points. One score that tells you whether the business is built to compound.
MOATEY's fundamentals score isn't a single ratio — it's the weighted sum of four pillars, each measuring a different dimension of business quality. Together they answer one question: is this a company you'd want to own for the next decade?
Growth
15 pointsSustained revenue, earnings, and free-cash-flow growth across multiple windows (1-, 3-, 5-, 10-year). We reward durable compounding, not single-year spikes.
- Revenue CAGR vs sector
- Earnings consistency
- FCF growth
- Reinvestment runway
Financial Health
15 pointsA balance sheet that survives downturns. Debt coverage, interest coverage, liquidity, and the quality of earnings vs reported profit.
- Net-debt / EBITDA
- Interest coverage
- Current ratio
- Cash conversion
Management
15 pointsCapital allocation discipline. Does management reinvest at high returns, buy back shares accretively, and avoid value-destroying M&A?
- Return on invested capital
- Buyback timing
- Insider ownership
- Compensation alignment
Competitive Advantage (Moat)
20 pointsA durable edge that lets the business earn returns above its cost of capital for a decade or more — brand, network effects, switching costs, scale, or IP.
- Gross margin stability
- ROIC vs WACC
- Market share trend
- Pricing power
Why these four?
Growth without health is fragile. Health without management is dead weight. Management without a moat is undermined by competition. A moat without growth is a melting ice cube. The four pillars are interdependent — a great business scores well on all of them.
Fundamentals are 65 of the 95 total MOATEY points; valuation supplies the remaining 30. A great business at the wrong price still earns a "Risky" rating, and a fair business at a deep discount can climb to "Good".