Methodology

This document explains the formulas used in the Buffett Analyzer and how we normalize components into a composite score.

Owner Earnings

OE = Net Income + Depreciation & Amortization (+ other non-cash) − Maintenance CapEx. Optionally penalize Δ Working Capital.

Greenwald Maintenance CapEx

We compute the average PPE/Sales over history and estimate growth capex as ratio × positive ΔSales. Maintenance CapEx = Total CapEx − Growth CapEx. If history is insufficient, we fall back to ≈ D&A.

Altman Z / Z’

Z (manufacturing/public) and Z’ (non-manufacturers/private) variants are supported. We output both score and zone.

Capital Preservation

We blend normalized Z-zone, inverse of max drawdown, and inverse of annualized volatility, with optional contrarian multiplier.