Does a high TCF Score predict returns?
We tested it — no.
Every screener quietly implies that its top-ranked stocks are the ones to buy. We tested that claim against our own 6-factor TCF Score: each June since 2016 we ranked the largest US companies by their score as it stood at the time, split them into five equal buckets, held each bucket for a year, and compared the result with the S&P 500. The top quintile did not beat the index, and scores were not monotonic — the bottom bucket outran the top one. We publish the result anyway, because the score was never meant to be a return forecast: it measures business health and reporting quality — whether a company is profitable through time, conservatively financed and free of accounting red flags — and the market already prices that in.
Growth of $1 by score quintile
Q1 = highest scores, Q5 = lowest. Benchmark is the S&P 500 (SPY, price return). Annual rebalance each June 30.
Year by year
Return of each quintile over the 12 months following the rebalance date, in percent.
What this means — and what it doesn’t
A high score tells you a company has been healthy: strong returns on capital, clean accruals, low bankruptcy risk, no manipulation flags. It does not tell you the stock is cheap, and it does not tell you it will outperform — quality that everyone can see is quality that is already paid for. We keep the score on the site as a diagnostic: a fast way to see whether a business is sound and where its weaknesses are, before you look at anything else. Treating the screener’s top rows as a buy list is exactly the mistake this page is here to prevent.
Methodology and honest limitations: universe = the largest US companies by point-in-time, split-adjusted market cap each June (about 120 names per year), sourced from today’s 300 largest with at least 6 years of SEC filing history — so companies that were large a decade ago but have since shrunk or delisted are under-represented; this survivorship tilt flatters every bucket roughly equally but flatters the absolute numbers. Scores are computed from the SEC filings available at each rebalance date. Returns are price-only, equal-weight, before costs and taxes; the benchmark is buy-and-hold SPY. All figures are hypothetical and backtested. Past performance does not guarantee future results. Nothing on this page is investment advice or a recommendation to buy or sell any security. See also our Momentum Portfolio backtest, the Quality Momentum backtest and the survivorship methodology.