Morningstar

Growth Grade

The growth grade is based on the trend in revenue per share using data from the past five years. It’s one of three grades within Morningstar’s quantitative stock-scoring system, and is meant to help users quickly get a handle on a company’s fundamentals.

All grades are based on relative rankings. For example, a company that receives an "A" in growth is a company that ranks near the top of our universe in terms of growth. The growth grade is based on the trend in revenue per share using data from the past five years. In calculating the revenue per share growth rate, we calculate the slope of the regression line of historical revenue per share. We then divide the slope of the regression line by the arithmetic average of historical revenue per share figures. The result of the regression is a normalized historical increase or decrease in the rate of growth for sales per share. We then calculate a z-score by subtracting the universe mean revenue growth from the company's revenue growth and dividing by the standard deviation of the universe's growth rates.

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