Investing is all about analyzing and weighing risks and rewards. Our unique research format was created to provide investors with the insight they’re looking for when trying to understand the potential of a resource company.
Risk Reward Research is a qualitative analytical approach built around a straightforward and honest assessment of the positives and negatives that affect valuation and share price potential.
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NXTanalytic uses a qualitative rating methodology to evaluate the potential and performance of promising companies in the resource sector. We focus on identifying the risks and opportunities companies face, including intangible issues, which can pose strong implications for future stock price performance.
NXTanalytic recognizes that management capacity, not always captured by conventional analytical methods, is an essential factor in determining the success of emerging and growth companies; therefore, this factor may receive significant weighting in our ratings.
In order to generate our ratings analysts evaluate companies relative to peers in their sector, taking into consideration specific risks and positives/rewards. NXTanalytic accomplishes this through the completion of our analytical matrix, reviewing a wide variety of information from the company, sector research, and, importantly, interviews of the company managers by our analysts. The resulting report provides individual investors with a qualitative tool, which allows them to become better aware and acquainted with investment opportunities. We believe companies with high rewards to risks weightings reflect an above average opportunity for investors.
We utilize three ratings. In descending order from best to worst, the ratings are:
Each of the ratings corresponds to a coefficient, derived as follows:
The analyst assigns a numerical score from 1-16 to each of the Rewards and a score from 1-16 to each of the Risks described in Risk/Reward Report.
The ratio of reward vs. risk (the sum of the four most significant rewards divided by the sum of the four most significant risks), becomes the rating coefficient which intends to project potential future performance.
Stocks that have a coefficient of 2.1 or higher are considered Buy. A Speculative Buy rating corresponds to a coefficient in the range of 1.1-2.0 which represents a higher risk profile. A coefficient that falls below 1.1 represents the highest proportion of risk and is therefore rated as High Risk.
Future stock performance is generally dynamic rather than static therefore our rating also includes a guidance component; the Momentum Bias, which indicates the direction in which the analyst believes the company is performing and whether there are near term factors that could affect share prices.
The Momentum Bias can be one of the following five categories, listed in order of performance from best to worst:
A stock may be rated as a ‘speculative buy‘ or even ‘high risk’. But, if the Momentum Bias is ‘urgent’ or ‘aggressive’ the analyst believes that company performance could improve significantly in the immediate or near term.