Trendlyne Scores: Durability, Valuation, Momentum (DVM)

Trendlyne’s algorithms track market data, financials, shareholding patterns and insider trades, technical and fundamental ratios, broker upgrades, news/trends etc. We have now used this intelligence to bring you Trendlyne Scores across three metrics - Durability, Valuation and Momentum.

These are the first proven stock scores available in India - we provide you with the charts and backtests to verify score quality.

The three scores help users screen stocks more easily. The higher the score, the better it is for each parameter. This allows investors to quickly cull out stocks that are weak investments, and focus on the stronger investments.

The scores will be fine-tuned in the coming weeks as we tweak the algorithm. But these scores are already quite strong: see the backtested results.

What is the DVM?

Every stock on Trendlyne gets scored on three trademark metrics: Durability, Valuation and Momentum. Stocks are ranked from 0 (worst) to 100 (best) on each score. Scoring is a great filter: it helps you refine the stock universe you are researching, and quickly understand the overall health of a stock.​

  • Momentum is a very effective short term score, while Durability and Valuation help assess the stock’s health over the long term.
  • The Valuation score helps you identify stocks which are still bargains, and whose strengths are not yet fully priced into the share price.
  • The Durability score looks at many different metrics, including long-term performance data, to identify stocks that have stood the test of time.

Stocks that are green on all three DVM metrics are rare, because our scoring is fairly stringent. But those stocks are likely winners, as long-term holds for your portfolio.

Stocks that score high in durability, valuation, momentum, as well as across the DVM, significantly outperform the index (see figures 1, 2, 3, 4).

Consolidated chart - how good is the DVM ?

When taken together, the scores provide a great snapshot into the stock that an investor is analyzing. The company is classified according to how the stock scores across all three parameters. The stocks that are in the top 20% of all three scores significantly outperform the index.

The scores are consequently a great investing guide, allowing investors to avoid bad stocks and pick ones more likely to be winners. Subscribers to our stock scores can also use these scores in their own screeners, improving their strategies, and using these scores both as a criteria and a filter.

DVM (Durability, Valuation and Momentum) Score Performance

Figure 1: Stocks with high combined DVM score outperform the Nifty 500 significantly. Here cumulative returns for high DVM stocks is 1052% compared to benchmark returns of 93.92%.

See detailed backtests for High DVM,Mid DVM,Low DVM stocks

Classifying stocks based on the DVM score

The main classifications of stocks based on the DVM are as follows:

Classifications based on durability, valuation and momentum scores
In this classification, G = Good, M = Mid(neutral) and B = Bad.
  • Durability scores above 55 are considered good(G) and below 35 are considered bad(B). Scores between 35-55 are considered neutral/Medium/Middle(M)
  • Valuation scores above 50 are considered good(G) and below 30 are considered bad(B). Scores between 30-50 are considered neutral/Medium/Middle(M)
  • Momentum score above 59 are considered good(G) and below 30 are considered bad(B). Scores between 30-59 are considered neutral/Medium/Middle(M)
    For example :
  • DVM is GGG: DVM is good across all three metrics. The stock qualifies as a “high performer” in financials and immediate outlook.
  • DVM is GGB: The stock is strong in durability and valuation, doesn’t have momentum. This indicates that the stock is a value stock, where the market enthusiasm gap provides an opportunity for the investor.
  • DVM is GBG: A stock where it looks like the real opportunity is past. The company is strong, but valuation is expensive and momentum is driving prices up.
  • DVM is BGG: These alert investors to riskier investments. Past durability of the stock is not strong, but investors should look for signals here for the company exercising a turnaround, or a pivot into a more profitable segment. Valuation and momentum is good: Turnaround Potential
  • DVM is BGB: While valuation is good, there isn’t much in stocks with this classification that indicates real promise. Both durability and momentum are weak, suggesting that these stocks may struggle to get out of the price hole that it is in now. Value Trap.
  • DVM is BBG: These stocks have momentum technically, with share price rising. But there is little to defend the rise. These mark stocks whose names you often hear in ‘stock tips’ - they rarely offer anything more than adrenaline highs.
  • DVM is BBB: Bad across metrics, there is not much to redeem stocks with this classification.

Do scores change?

Yes, Durability and Valuation scores get revised significantly based on the company’s quarterly and annual performance, as well as daily changes in ratios such as P/E. Additional events like warnings issued on the stock by regulators are also part of our algorithm, and impact the score.

The Momentum score changes on a daily basis (end of day) since this tracks the daily price, volume movement and other technical indicators to assess the bullishness/bearishness of a stock.

Durability Score

Scores are calculated from 0-100, with zero the worst and 100 the best.

Durability scores above 55 are considered good(G) and below 35 are considered bad(B). Scores between 35-55 are considered neutral/Medium/Middle(M)

Stocks with a high durability score (top 20 percentile) are companies that have consistently and over time, demonstrated good growth and cashflow, stable revenues and profits, and low debt.

The durability score considers several different metrics and ratios around earnings, and models these over time.

Our stocks with high durability scores outperform the index significantly

Durability Score Performance

Figure 2: Stocks with high durability score outperform the Nifty 500 significantly. Here cumulative returns for high durability stocks is 354% compared to benchmark returns of 93.92%.

See detailed backtests for High Durability,Mid Durability,Low Durability stocks

Valuation Score

Scores are calculated from 0-100, with zero the worst and 100 the best.

Valuation scores above 50 are considered good(G) and below 30 are considered bad(B). Scores between 30-50 are considered neutral/Medium/Middle(M)

Stocks with a high valuation score (top 20 percentile) are companies whose business and financial advantages have not yet been priced into their share price. These companies typically have strong earnings but are currently flying under the radar, and Trendlyne’s valuation score helps shine a spotlight on these companies.

Firms with a low valuation score (bottom 20 percentile) are expensive stocks that have good broker coverage and already have their strengths priced in. They are popular but pricey. If you are buying them now it would be for a steep price tag: valuation scores help you identify that.

Our stocks with high valuation scores outperform the index significantly:

Valuation Score Performance

Figure 3: Stocks with good valuation score outperform the Nifty 500 significantly. Here cumulative returns for good valuation stocks is 249% compared to benchmark returns of 93.92%.

See detailed backtests for Good Valuation,Mid Valuation,Bad Valuation stocks

Momentum Score

Scores are calculated from 0-100, with zero the worst and 100 the best.

Momentum score above 59 are considered good(G) and below 30 are considered bad(B). Scores between 30-59 are considered neutral/Medium/Middle(M)

Momentum score or Technical score identifies the bullish/bearish nature of the stock. Stocks with a high momentum score (which is calculated daily from over 30 technical indicators) are seeing their share price rise, and increase in volumes and sentiment.

A low and falling technical score indicates a falling share price. The pace at which this is changing is also important for the momentum score.

Momentum Score Performance

Figure 4: Stocks with high technical momentum score outperform the Nifty 500 significantly. Here cumulative returns for high momentum stocks is 549% compared to benchmark returns of 93.92%.

See detailed backtests for High Momentum,Mid Momentum,Low Momentum stocks

Stocks not eligible for scores

Ineligible for Durability score

Some stocks are identified by Trendlyne as ineligible for a durability score. A stock is considered ineligible for such scoring when Trendlyne cannot validate the financials, due to one or more data points in the financial statements:

  • Not enough data available for our algorithms (newly listed stocks)
  • Other income > 70% of revenues in Trailing Twelve Months(TTM), AND other income > revenues in at least two quarters in the past twelve months.
  • Revenues TTM < Rs. 30 crore
  • Company market capitalization < Rs. 50 crores
Ineligible for Valuation score

Some stocks are identified by Trendlyne as ineligible for a valuation score. A stock is considered ineligible for such scoring when:

  • Not enough data available for our algorithms (newly listed stocks)