The math behind every score
Every score in a Sentinellis report is derived from public financial data using established academic models — not opaque proprietary blends. Here are the formulas, inputs, and how to read each output.
Sentinellis Health Score (0–10)
Composite score across 6 categories
A weighted blend across six fundamental categories, normalized to a 0–10 scale. Companies are penalized when data is missing rather than getting a free pass. We added gross margin, ROE, and debt/equity checks after noticing healthy companies (ASML, Tesla) were scoring 3.5/10 under an older formula that capped at 8.0 and skipped missing inputs.
Strong (≥7)
Multiple positive signals across categories
Mixed (4–7)
Some strengths, some concerns
Weak (<4)
Multiple red flags or fundamentals missing
Piotroski F-Score (0–9)
Joseph Piotroski, 2000 — fundamental strength check
A nine-point binary scorecard testing profitability, leverage, liquidity, and efficiency. Each test passed earns one point. Originally developed by Stanford accounting professor Joseph Piotroski to identify financially strong companies in the value segment of the market.
Reading the score
- 8–9: Strong fundamentals across categories
- 4–7: Mixed — investigate the categories failing
- 0–3: Weak fundamentals; deeper due diligence required
Sentinellis awards partial credit when a Piotroski input is missing rather than scoring it as failed. Stated explicitly in each report so you can audit the score.
Altman Z-Score
Edward Altman, 1968 — bankruptcy risk predictor
A weighted formula combining five financial ratios to estimate bankruptcy probability over the next two years. Developed by NYU Stern professor Edward Altman in 1968 and widely used in academic and lending contexts.
Safe (Z > 2.99)
Low bankruptcy risk
Grey (1.81–2.99)
Investigate further
Distress (Z < 1.81)
Elevated bankruptcy risk
ROIC vs WACC (value creation)
The single most important question in fundamentals
ROIC — Return on Invested Capital
How much profit the business earns per dollar of capital invested in operations.
Where NOPLAT = EBIT × (1 − tax rate); Invested Capital = total debt + equity − cash & equivalents
WACC — Weighted Average Cost of Capital
The blended cost of the capital the business raised — debt plus equity, weighted by the proportion of each.
Where E = equity, D = debt, V = E + D, Re = cost of equity (CAPM), Rd = cost of debt, t = tax rate. Sentinellis sets debt_weight = 1 − equity_weight to keep them consistent.
The spread (ROIC − WACC)
When ROIC > WACC, the business creates value with every dollar reinvested. When ROIC < WACC, growth destroys value — the firm would be better off returning cash to shareholders. This single ratio is one of the most predictive signals of long-term equity returns.
Confidence Score (1–10)
How much to trust this specific report
Every report carries a confidence score reflecting how much source data was available. The score is set by the synthesis agent based on:
- ·35% financial data completeness — were all key statements available?
- ·30% legal & jurisdictional clarity — is the entity well-defined and tracked?
- ·35% market sentiment / news coverage quantity & quality
A confidence of 8–10 means we had rich data and high-tier sources. A score of 5–7 means a known gap (e.g., missing financials). Below 5 means treat the report as exploratory only.