• Learn how AAII A+ Stock Grades evaluate value, growth, momentum, quality and earnings estimate revisions
• Understand the metrics behind each grade and how percentile rankings help identify attractive stocks
• Discover how to use the Stock Evaluator to build stronger screening and investing strategies

The AAII A+ Investor Stock Grades evaluate stocks across five key investment factors: value, growth, momentum, earnings estimate revisions (and surprises) and quality. The grades are based on percentile rankings that compare each stock against all other stocks in the AAII universe of over 6,600 companies. A stock in the 85th percentile for its Value Grade is cheaper than 85% of all other stocks. Grades are distributed evenly, with the top 20% of stocks receiving A’s, the next 20% receiving B’s and so on through F’s for the bottom 20%.

The quantitatively calculated letter grades are available to A+ Investor and Platinum subscribers, but all AAII members can see the many of the key measures underlying those grades. The AAII Stock Evaluator provides percentile rankings for valuation and growth metrics, with many key financial metrics available in the Snapshot, Ratios and Financials tabs. To access the Stock Evaluator, simply type a company’s name or ticker symbol into the search box at the top of most AAII.com pages.

This article shows the metrics that are used to calculate each of our grades and explains how you can use those metrics to determine whether or not a stock is attractive.

The Value Grade: Identifying Stocks Trading at a Discount

Value investors seek to buy stocks trading below their intrinsic value.

The Value Score combines six valuation metrics to arrive at the Value Grade. Valuation ratios can differ by industry. Technology companies might show high price-to-book-value (P/B) ratios, while homebuilders often trade at much lower price-to-book ratios. The Value Grade considers the average of all six ratios to capture the overall valuation picture.

You can see all six ratios and their percentile rankings in the Valuation tab of the Stock Evaluator (Figure 1). Lower percentiles indicate better value.

• Price-to-Sales (P/S) Ratio: Measures dollars paid per dollar of sales (“revenues”). Sales are harder to manipulate than earnings. The price-to-sales ratio is useful for companies with negative or volatile earnings.
• Price-Earnings (P/E) Ratio: Calculates the multiple of total earnings for the most recent four quarters that investors are willing to pay.
• Ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA): Measures operational value relative to operational earnings. The enterprise-value-to-EBITDA ratio is considered to be neutral to capital structure since it accounts for debt.
• Shareholder Yield: Combines dividend yield and buyback yield to account for the total amount returned to shareholders. Shareholder yield is inversely related to valuation, meaning higher yields are preferable.
• Price-to-Book Ratio: Compares a stock’s price to its net asset value (NAV), which is total assets less total liabilities.
• Price-to-Free-Cash-Flow (P/FCF) Ratio: Shows valuation relative to cash realized from business operations less dollars allocated to capital expenditures (capex) such as machines or buildings. Cash flow is harder to manipulate than earnings.

Academic and industry research shows that portfolios of stocks with valuations ranking in the lowest 40% tend to outperform over the long term. Like other styles, value experiences periods of both outperformance and underperformance. Under all environments, value stocks tend to trade at prices that provide more upside should their results be better than expected.

The Growth Grade: Consistent and Sustainable Growth

The Growth Grade emphasizes the notion that “slow and steady wins the race.” Companies growing at extremely high rates attract competition or face saturation. When growth slows, stock prices typically fall.

The Growth tab of the Stock Evaluator provides percentile rankings for growth trends. There are three metrics used to calculate the Growth Score.

• Year-Over-Year Sales Growth: Measures the consistency of growth. Companies with sales increases in all five years score highest. The Financials tab of the Stock Evaluator shows how consistent growth has been.
• Five-Year Average Annual Sales Growth: Captures the magnitude of annualized growth. Stocks ranking in the 40th to 59th percentiles often outperform those with the highest growth, followed by those in the 60th to 79th percentiles. Growth rates of, say, 100% annually are rarely sustainable. The Stock Evaluator’s Snapshot and Growth tabs both show the company’s ranking on five-year sales growth.
• Annual Cash From Operations: Verifies whether a company’s sales are resulting in cash generation. The Financials tab includes this data in the annual cash flow statement section. Annual operating cash flow should be positive for each of the past five fiscal years.

Growth investors should seek out companies that have a year-over-year sales growth ranking between the 40th and 79th percentiles, a track record of growing sales and positive cash flow. Avoid stocks that have very high growth rates and/or are not turning sales into positive cash flow. [For more on the importance of cash flow, see the Stock Strategies article in this issue.]

The Momentum Grade: Profiting From Price Outperformance

Momentum investing capitalizes on the tendency of stocks with high relative strength to continue outperforming. It is based on two behavioral ideas: First, investors like stocks that are doing well, and second, rising prices signal expectations for the business to perform well.

The Momentum Grade is based on a Momentum Score that uses a weighted four-quarter approach, giving more weight to recent price performance (40% for the most recent quarter, 20% each for the prior three quarters). Our research found that this approach works better than looking at only the past 13 weeks or considering 52-week relative performance on an unweighted basis.

The Stock Evaluator’s Snapshot tab shows the price change (52-week) metric along with its percentile ranking. This metric indicates whether the stock has positive momentum, but we also suggest clicking on the Charts tab to confirm that the stock has outperformed over the most recent 13-week (three-month) period. Additionally, you can judge a stock’s price performance against the broader market by clicking the Add Symbol button above the chart to add an index exchange-traded fund (ETF) to compare the stock against. Invesco Russell 1000 Equal Weight ETF (EQAL), which equally weights the largest 1,000 U.S. stocks, can work well for such comparisons.

Price change rankings above the 80th percentile indicate very strong momentum. Those between the 60th and 79th percentiles show good momentum. The 40th to 59th percentile range indicates neutral momentum, and rankings below the 40th percentile signal weakness.

Check whether momentum is consistent across time frames. Strong 52-week performance combined with underperformance for the most recent 13-week period suggests fading momentum. Weak 52-week performance with improving three-month trends can signal turnaround potential.

The Quality Grade: Financial Strength and Stability

Quality stocks possess underlying financial strength. Stocks exhibiting strong quality traits have reduced downside risk, while those with weak quality are risky.

The Quality Grade is based on a Quality Score that evaluates eight components. The Ratios tab of the Stock Evaluator lists values for many of the components underlying this grade (Figure 2). Percentile rankings for some of these metrics can be found in the Evaluator’s Snapshot tab.

Many of these individual metrics vary by industry and sector. What may be high for a manufacturer may not be high for a biotechnology company. Nonetheless, low numbers for several metrics are a reason for concern.

• Return on Assets (ROA): Shows how efficiently a company’s management uses its assets to generate earnings. Higher numbers are better, but the ratio does vary by industry and sector.
• Return on Invested Capital (ROIC): Calculates the profit that a company generates from long-term sources of capital (equity and debt). Return on equity (ROE) can be used as a substitute, though return on invested capital is more comprehensive.
• Gross Profit to Assets: Looks at gross profitability relative to assets. The data used to calculate this ratio [(sales – cost of goods sold) ÷ total assets] can be found in the Financials tab of the Stock Evaluator. Higher values are better.
• Buyback Yield: Measures the year-over-year change in net shares outstanding. On the Financials tab, look in the Summary Per Share Values section for the average number of shares outstanding to determine the trend. Portfolios of stocks with bigger percentage declines in shares outstanding have historically outperformed. Large relative increases in shares outstanding are dilutive to shareholders and hurt performance, especially when used to raise capital instead of being related to a recent acquisition.
• Change in Total Liabilities to Assets: Shows whether total liabilities are increasing or decreasing relative to total assets. This data can be found in the Capital Management Ratios section of the Ratios tab. Declining ratios indicate improving health. Research the reason for any significant increase in liabilities relative to assets.
• Accruals to Assets: Measures the extent to which operating cash flow exceeds net income. We scale the ratio to total assets to enable comparisons between different-sized companies. Earnings tend to be more persistent when they are exceeded by cash flow. Use the Financials tab to determine if operating cash flow is greater than net income.
• Z Double Prime Bankruptcy Risk (Z) Score: Measures the risk of a company having significant financial distress. This metric is displayed at the top of the Ratios tab. Scores above 3.0 indicate that a firm is unlikely to enter bankruptcy. Scores below 1.8 indicate that a firm is at risk of bankruptcy. Scores between those ranges are statistically unclear about a company’s bankruptcy risk.
• F-Score: Assesses a stock’s fundamental strength using a nine-point scale. Points are awarded based on whether a stock meets each of four profitability criteria, three capital structure criteria and two operating efficiency criteria. Scores of 7 or higher indicate fundamental strength, while scores of 3 or lower indicate weakness. The F-Score can also be found at the top of the Ratios tab.

The Earnings Estimate Revisions Grade: Changes in Expectations

A consensus earnings estimate is the average of the earnings that covering analysts expect a company to report for any upcoming year or quarter. Unlike analyst recommendations, which are skewed toward buy or outperform ratings, earnings estimates reveal whether analysts view a company as performing better or worse than previously expected.

Revisions to earnings estimates can drive stock performance. AAII’s earnings estimate screens that focus on stocks with upward revisions historically have some of the highest total and risk-adjusted returns among all the AAII Stock Screens tracked. Our earnings estimate screens that focus on stocks with downward revisions have had among the worst long-term performance.

The Earnings Estimate Revisions Grade examines four components.

• Quarterly Surprise SUE Latest Quarter: Measures whether reported earnings for the most recent quarter truly surprised. Rather than comparing the reported earnings to the consensus estimate, the standardized unexpected earnings (SUE) score considers the statistical range of expected earnings based on analysts’ estimates. A SUE score of zero is assigned when a company meets expectations. The further away from zero a SUE score is, the greater the extent to which reported earnings were truly a surprise.
• Quarterly Surprise SUE Prior Quarter: Same as the previous metric but for the quarter preceding the most recently reported quarter. (As of late February 2026, this metric would mostly assess third-quarter 2025 earnings since the most recently reported quarter was fourth-quarter 2025.)
• EPS Estimate Current Year % Revision Over the Last Month: Shows the percentage change in the consensus earnings per share (EPS) estimate over the past 30 days. It is calculated as [(current consensus earnings estimate ÷ the 30-days-ago consensus estimate) – 1]. Analysts often make small tweaks to their forecasts; revisions of at least 5% are more significant.
• EPS Estimate Current Year % Revision Over the Last 3 Months: Similar to the previous metric, this calculates the change between the current earnings estimate and the consensus estimate from three months ago. It provides a longer, but still relevant, view of how analysts’ expectations have changed.

The Snapshot tab shows the current consensus estimate along with the estimates from one month ago and three months ago. A+ Investor and AAII Platinum subscribers can access the Earnings tab to see several quarters of earnings surprise history.

Putting the Five Factors Together

Combining the criteria behind multiple grades provides more robust analysis than relying on a single factor.

Quality, momentum and earnings estimate revisions can be overlayed on any strategy. Value strategies pair well with momentum and quality characteristics. Technical analysis is enhanced when watchlists include stocks with strong quality traits and positive earnings estimate revisions.

Growth investors should emphasize sustainable growth and strong underlying quality. Growth at a reasonable price (GARP) investors are encouraged to combine both Growth and Value Grade components. Doing so will reduce the odds of overpaying for sustainable growth.

Most of the underlying components of the A+ Grades can be accessed in the Stock Evaluator. A+ Investor and AAII Platinum subscribers can see the actual grades and the factors driving those grades through the Grades tab of the Stock Evaluator. A+ Investor and AAII Platinum also provide subscribers with the ability to screen based on the A+ Grades via the Custom Screener and view the grades for all of the stocks held in your My Portfolio. 

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