NXTanalytic uses a qualitative rating methodology to evaluate the potential and performance of promising emerging growth companies in various sectors. We identify and score the risks and opportunities they face, including intangible issues, which can pose strong implications for future stock price performance.
We recognize that management and financing capacity, not always captured by conventional analytical methods, is an essential factor in determining the success of emerging growth companies; therefore, this factor may receive significant weighting in our analysis.
Our research process begins by evaluating companies relative to their peers, taking into consideration specific sector risks and positives/rewards. NXTanalytic accomplishes this through the completion of our analytical matrix, reviewing and scoring a wide variety of information about the company and its business opportunity, operations, sector, peers, management and financing ability.
Our analysts assign a numerical score from 1-16 to each risk and reward. The ratio of reward vs. risk (the sum of the most significant rewards divided by the sum of the most significant risks) becomes the rating coefficient. We provide three potential ratings corresponding to the coefficient of risk and reward scores.
Stocks that have a coefficient of 2.1 or higher are considered Buy. A Speculative Buy rating corresponds to a coefficient in the range of 1.1-2.0 which represents a higher risk profile. A coefficient that falls below 1.1 represents the highest proportion of risk, and is therefore rated as High Risk.
Future stock performance is generally dynamic therefore our rating also includes a guidance component; the Momentum Bias, which indicates the direction in which the analyst believes the company is performing and whether there are near term factors that could affect share prices.
The Momentum Bias can be one of the following five categories, listed in order of performance from best to worst:
