How the Moat Score is built
A score you can't inspect is a horoscope. So here is exactly how the Moat Index turns a company's own SEC filings into a number — and, just as important, where the honest limits are. Nothing here is a recommendation; it's a framework for judging business quality and price.
Where the data comes from
Every input is pulled from primary filings via the SEC's EDGAR XBRL data — the same 10-K numbers a company files with regulators. We normalize each filer's tagged concepts into a consistent set of line items, take annual (10-K) figures, and prefer the latest-filed disclosure when a period has been restated. When a company hasn't reported something we need, we leave it blank rather than guess.
The Moat Score (0–100)
The composite is a weighted blend of four sub-scores, each answering one Buffett question.
Pricing power — 30%
Gross-margin level and stability over up to ten years. High, steady gross margins are the fingerprint of a moat: a brand, a switching cost, or a low-cost position that lets a business hold price without losing customers.
Returns on capital — 30%
Return on invested capital (after-tax operating profit ÷ invested capital), measured for both magnitude and how consistently it clears a ~9% cost-of-capital hurdle through the cycle. Consistently high ROIC is the hardest thing for a competitor to attack — it's what "wonderful business" means in numbers.
Balance-sheet safety — 20%
Net debt relative to EBITDA and interest coverage. A wide moat on a fragile balance sheet isn't a Buffett business, so heavy leverage caps this sub-score regardless of the others. A net-cash company scores at the top.
Capital discipline — 20%
Owner-earnings growth and share-count behaviour. Buybacks at sensible prices shrink the share count and compound per-share value; serial issuance dilutes it. This is the sub-score that separates a great business from a great business run by people who waste its cash.
Moat tiers: Wide (80–100), Narrow (60–79), Shallow (40–59), None (below 40).
Margin of safety
Quality is only half the question; price is the other. We estimate owner earnings — net income plus depreciation and amortization, minus maintenance capital expenditure — and capitalize a normalized figure with a deliberately conservative discount rate and a hard cap on assumed growth. Comparing that intrinsic value to the recent price gives a discount or premium: the margin of safety.
The honest limits
Maintenance capex is an estimate. The SEC doesn't split capital spending into "maintenance" and "growth," so we approximate maintenance capex as the lesser of reported capex and depreciation. It's a defensible proxy, not a precise figure, and we'd rather say so than pretend.
Banks and insurers are excluded. A margin-and-ROIC model doesn't fit financial-sector businesses, so for now we don't score them rather than publish a misleading number.
Insufficient data means no score. If a company is missing inputs a sub-score needs, it gets "insufficient data," never a guessed value.
Scores change only as filings do. The composite moves when a company files new numbers, not with the daily price. We log every reading with a timestamp and the methodology version that produced it, so the history stays auditable and comparable over time.
What this is not
The Moat Index is an educational framework, not investment advice, and not a buy or sell signal. It can't know your circumstances, and a high score is a statement about a business's past durability, not a promise about its stock. Read the full disclaimer, then go score a company.