The value of this rating is an indication of the relationship between the price at which the company trades on the stock exchange and the free earnings of the last ten accounting periods. A high rating will indicate that the quote price is low relative to the free earnings. A low rating will indicate a high price in relation to these free earnings.
The following table can serve as a reference for the use of this rating:
|Rating value range||Interpretation|
|0 - 2||Very high company price in relatio to its free earnings|
|2 - 5||High company price in relatio to its free earnings|
|5 - 8||Company price proportional to its free earnings|
|8 - 10||Low company price in relation to its free earnings|
Free earnings are an earnings variant calculated by Gradement and used to value the company using this rating.
In order to calculate the free earnings Gradement adjusts the earnings of the last ten accounting periods, discarding inflation and technical amortization, and incorporating the capital expenses of the company and also taking into account its growth rate. This free earnings is a magnitude more appropriate to value the company than the simple earnings figure as published by the companies in its financial statements.