No. of Recommendations: 12
Hey Fools,

Here's my attempt to rank PINS


Metric (score potential) PINS

Financial:

Financial Resilience:(0 - 5) 5
Gross Margin: (<50%, 50% to 80%, >80%) (0 - 3) 2
Returns On Capital: (Low, Average, Rising)(0 - 3) 1 (low but rising fast)
FCF: (Negative / Positive / Positive and growing fast) (0 - 3) 3
EPS: (Negative / Positive / Positive and growing fast) (0 - 3) 3

Moat:
Network effect (None / Weak / Strong) (0 - 15) 5 (weak, but some)
Switching costs (None / Weak / Strong) (0 - 15)
Durable Cost Advantage:(0 - 15)
Intangibles: (0 - 15) 10 (brand)
Moat Direction: (Narrowing / Stable / Widening) (0 - 5) 5 (business momentum)

Potential:
Optionality:(0 - 7) 4 (I don't see much beyond its core offering)
Organic Growth Runway: (G.D.P. / 2x or 3x G.D.P. / 15%+) (0 - 4) 4
Top dog And/Or Industry Disruptor:(0 - 3) 3 (visual search)
Operating Leverage Ahead?(0 - 4) 4

Customers:
Acquisition:(0 - 5) 2 (expensive to onboard)
Dependence: (0 - 5) 5

Company-specific factors:
Recurring Revenue: (None / Some / Tons) (0 - 5) 5
Pricing Power: (None / Inflation / Tons) (0 - 5) 5

Management & Culture:
Soul in the game: (Founder/Family Run/Long Tenured CEO) (0 - 4) 4
Inside ownership: (None / Modest / Very High) (0 - 3) 2
Glassdoor ratings: (0 - 4) 3
Mission statement? (Simple, Inspirational, Optional-able) (0 - 3) 3

Stock:
Performance Vs. S&P 500:(0 - 4) 1 (partial credit for day 1 pop)
Shareholder Friendly Actions:(0 - 3) 0
Consistently Beats Expectations?(0 - 4) 0 (not enough data)

Pre Gauntlet Score: 83 (excellent)

The Gauntlet

Customer Concentration:(-5 , -3, 0) 0
Industry Disruption:(-5, -3, 0) 0
Outside Forces:(-5, -3, 0) 0
Big Market Loser: (-5, -3, 0) 0
Binary Event: (-5, 0) 0
Extreme Dilution: (-4, -2, 0) 0 (not enough data)
Growth By Acquisition: (-4, -2, 0) 0
Complicated Financials (-3, 0) 0
Antitrust Concerns: (-3, 0) 0
Political Risk: (-3, -2, 0) 0
Currency Risk:(-2, -1, 0)

Final score: 79 (great)


For perspective, the highest score possible is 100, and the lowest score possible is -44.

Pinterest's 79 is great. This number could go even higher if the company regularly beats
expectations and thumps the S&P over time.

Pinterest's stock is expensive, and it came public at a FLAT valuation to what it achieved a few years ago in the public market. That's something to watch.

Still, there's no doubt in my mind that this is a high-quality business.

Brian

*******
FAQ:

Is there a spreadsheet that has all of your data?
Yes, but I do not want to make it publicly available. I will post on a company by company basis to the boards. Feel free to follow me if you want to see my most recent rankings.

What companies have received the highest scores so far?Alphabet (88), Paycom Software (86), MercadoLibre (85), Amazon (85), HubSpot (85), Adobe (84), Paylocity (84), and Q2 Holdings (84)

What data do you have to show that this methodology works? Very little. I'm currently thinking through ways to measure its long-term effectiveness, but my gut feeling tells me that it will help me pick better stocks.

What about valuation? This data is only designed to help me determine business quality, which is far more important than valuation. Whenever I personally make buy/hold/sell decisions, I always consider valuation too, but I think it is small "f" foolish to not buy a truly great business just because of valuation concerns.

You can read more about the checklist here: http://boards.fool.com/brian39s-quality-checklist-version-20...


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