Eight tests, every threshold published
The 8 Pillars is a screen, not a score. Each test is a single pass-or-fail check with a stated threshold, nothing is weighted, and no pillar compensates for another. You can disagree with any of them — which is the point of publishing them.
Price
Am I paying a sensible amount?
Five-year average P/E
Caps what you pay for each dollar of profit. The five-year average matters because a single exceptional or disastrous year can make an expensive business look cheap, or a sound one look ruinous.
Five-year average price to free cash flow
The same discipline applied to cash rather than reported earnings. Cash is considerably harder to shape into the number a management team would prefer.
Quality
Does this business deserve more capital?
Five-year average ROIC
The clearest single read on business quality. A company earning well above its cost of capital compounds shareholder money as it reinvests; one earning below it destroys value and grows the damage as it scales.
Growth
Is it getting better, and does the improvement reach me?
Revenue growth
Durable compounding starts at the top line. Price rises and cost cuts can lift profit for a while, but only growing revenue sustains it across a decade.
Net income growth
Confirms that growth survives costs, interest, and tax. Revenue rising while profit stalls usually means competition or cost inflation is absorbing the gain.
Free cash flow growth
The cash left after keeping the business running. Profit growing while cash flow does not is the disagreement most worth investigating.
Safety
Does it survive a bad decade without diluting me?
Shares outstanding
Buybacks hand you a growing slice of the same business. A rising count dilutes your ownership, which is why headline profit growth and profit growth per share can tell different stories.
Long-term debt to free cash flow
A survivability test. A business that could clear its long-term debt with a few years of cash flow can absorb a downturn without diluting shareholders or refinancing at the worst possible moment.
Where the method falls short
Any screen tight enough to be useful will exclude good investments. These are the cases where the pillars mislead, and knowing them is part of using it well.
Banks and insurers
Financial companies carry debt as raw material rather than as leverage, so the debt-to-cash-flow pillar reads incorrectly. The quality and growth pillars still apply.
Young, fast-growing businesses
A company reinvesting everything into growth will fail the cash-flow and valuation pillars while doing exactly the right thing. The screen is built for established businesses.
Cyclicals at the wrong point
A five-year average spanning a boom flatters a miner or a homebuilder. Look at the individual years, not only the average.
Anything the numbers cannot see
Management integrity, regulatory risk, a technology shift about to arrive. No arithmetic screen catches these, and they end more theses than valuation does.
A worked example, running now
Alphabet Inc. scored against all eight pillars on today's price. Each cell shows the measured value, the rule it was tested against, and why the test exists.
Falls short on 2 pillars: p/e ratio, price to free cash flow.
P/E ratio
Fail5yr average P/E below 22.5
Price to free cash flow
Fail5yr average P/FCF below 22.5
Return on invested capital
Pass5yr average ROIC above 9%
Revenue growth
Pass10yr CAGR above 0%
Net income growth
Pass10yr CAGR above 0%
Free cash flow growth
Pass10yr CAGR above 0%
Shares outstanding
PassShare count flat or shrinking over 5 years
Long-term debt to FCF
PassDebt payable from under 5 years of free cash flow
Run it on something you own
The score takes seconds. Deciding whether a failed pillar matters is the part worth your evening.