How the Moonshot Score Works

A selective growth score that identifies high-quality companies with significant long-term potential.

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Quality-First Approach

Unlike growth screens that simply chase revenue growth, the Moonshot Score requires stocks to pass 6 strict quality filters before they're even scored. Only ~10% of the market qualifies. This eliminates speculative growth traps and focuses on companies with real competitive advantages.

The Six Quality Gates

A stock must pass ALL of these filters to receive a Moonshot Score. These gates eliminate low-quality growth stocks.

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Gross Margin > 30%

Companies with strong gross margins have pricing power and competitive advantages. Low-margin businesses struggle to invest in growth.

Gate: Must exceed 30%
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Revenue > $50M

Ensures the company is a real business, not a speculative startup. Minimum revenue threshold filters out pre-revenue or tiny companies.

Gate: Must exceed $50M TTM
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Revenue Growth > 15%

The stock must actually be growing. Companies growing below 15% YoY don't qualify as "growth" stocks regardless of other metrics.

Gate: Must exceed 15% YoY
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Cash Flow Quality

Profitable companies must convert earnings to cash (OCF/NI > 70%). Unprofitable companies can't burn excessive cash (OCF/Rev > -50%).

Gate: Cash conversion test
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Balance Sheet Health

Debt must be manageable (Debt/Assets < 2.0). Overleveraged companies face existential risk in downturns.

Gate: Debt < 2x Assets
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Operating Income Quality

Earnings must come from operations, not one-time gains. OI/NI ratio must be between 0.3-3.0 to filter out accounting anomalies.

Gate: No one-time gains

The Eight Growth Factors

Only stocks that pass all quality gates are scored. These eight factors determine the final Moonshot Score.

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Revenue Growth (3-Year)

3-year CAGR of revenue. Longer timeframe reduces noise from one-time spikes. The most predictive growth factor.

Weight: 20%
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EPS Growth (3-Year)

3-year CAGR of earnings per share. Shows the company can grow profits, not just revenue.

Weight: 15%
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Gross Margin Level

Current gross margin. Higher margins indicate stronger competitive position and pricing power.

Weight: 15%
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Margin Improvement

Year-over-year change in gross margin. Improving margins signal operating leverage and scale benefits.

Weight: 10%
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FCF Margin

Free cash flow as a percentage of revenue. Measures how efficiently growth converts to cash.

Weight: 15%
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Return on Equity (ROE)

Net income relative to shareholder equity. High ROE companies generate strong returns on capital.

Weight: 10%
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Market Cap Factor

Smaller companies (within $500M+ universe) have more room to grow. Log-scaled preference for smaller caps.

Weight: 10%
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12-1 Month Momentum

Price return over past year, excluding last month. Captures trend while avoiding short-term mean reversion.

Weight: 5%

Why Quality-First Growth?

Most growth screens fail because they chase headline growth without verifying quality:

  • Avoid Growth Traps: High revenue growth often comes from unprofitable, cash-burning companies that eventually collapse. The quality gates filter these out.
  • Sustainable Growth: Companies with strong margins and cash flow can reinvest in growth without diluting shareholders or taking on dangerous debt.
  • Validated Performance: Backtested from 2020-2026, the top quintile outperformed the bottom by +23% annually with consistent results across market cap segments.
  • Selectivity: Only ~250 stocks (roughly 10% of the $500M+ universe) pass all quality gates. This extreme selectivity is intentional.

What We Deliberately Exclude

❌ Micro-Caps (<$500M)

Companies under $500M market cap are excluded due to liquidity concerns, limited analyst coverage, and higher manipulation risk.

❌ Speculative Growth

Pre-revenue companies, extreme cash burners, and stocks with suspicious accounting don't qualify regardless of growth potential.

❌ One-Time Gains

Companies where net income is inflated by asset sales, legal settlements, or other non-operating gains are filtered out.

❌ Heavily Leveraged

Companies with debt exceeding 2x assets face existential risk and are excluded regardless of growth metrics.

How the Score is Calculated

  1. 1

    Apply Quality Gates

    Each stock must pass all 6 quality filters. Roughly 90% of stocks are eliminated at this stage.

  2. 2

    Compute Growth Factors

    For qualifying stocks, we calculate 3-year CAGRs, margins, FCF, ROE, and momentum from latest financials.

  3. 3

    Standardize and Weight

    Each factor is converted to a z-score and weighted according to its predictive power.

  4. 4

    Convert to Percentile

    The weighted composite is ranked among all qualifying stocks to produce a 0-100 Moonshot Score.

Moonshot vs Compass Score

🚀 Moonshot Score

  • • Goal: Find quality growth stocks
  • • Focus: Revenue growth + profitability
  • • Universe: ~250 stocks pass filters
  • • Best for: Growth-oriented investors
  • • Risk: Higher volatility, higher potential

🧭 Compass Score

  • • Goal: Find quality value stocks
  • • Focus: Profitability + low volatility
  • • Universe: All 4,500+ stocks scored
  • • Best for: Conservative investors
  • • Risk: Lower volatility, steady returns

Using both: A stock with high scores in both Moonshot and Compass represents a rare combination of quality, growth, AND value - the best of both worlds.

Check the Valuation Too

The Valuation Score uses technical analysis to identify if stocks are trading below fair value. Useful for timing your entries on Moonshot stocks.

Learn About Valuation Score →
Browse Moonshot Stocks Learn About Compass Score