A plain-English guide to how Golden Door Asset selects 131 public software companies, calculates every 0 to 100 Quality Rating from audited financial filings, separates business quality from stock price valuation, and verifies data before publication.
131 Software Index Constituents ↓·30% Growth · 30% Operating Profit · 20% Gross Margin · 20% R&D Payback
You do not need a Wall Street background to understand what belongs in our software index. Every company must pass four objective business rules.
We use annual customer revenue rather than stock market capitalization to measure real commercial scale. Market caps swing daily with market mood, whereas $100 million in audited annual revenue proves established enterprise or consumer software demand while filtering out tiny micro-caps.
Real software companies invest continuously in product engineering. Requiring at least $10 million in annual research and development ensures meaningful innovation payback math and filters out shell companies or services businesses that do not build proprietary software.
Every constituent files standardized US GAAP financial statements in US dollars on major US exchanges, with its latest filing no older than 15 months. We exclude foreign-currency filers so exchange-rate swings never distort year-over-year growth or R&D payback comparisons.
We focus strictly on subscription, cloud, cybersecurity, infrastructure, data, and vertical application software. Banks, lenders, biotech labs, hardware manufacturers, ad-buying agencies, consumer marketplaces, and IT staffing consultancies are excluded.
We intentionally do not impose a 50% gross margin cutoff or grant special exemptions to famous tickers. Keeping low-margin or money-losing software companies inside the 131-company universe prevents survivorship bias: poor performers naturally earn Weak or Laggard ratings, giving investors a complete, honest benchmark from best to worst.
Every company is ranked from 0 to 100 against all peers in the software index across four everyday business questions, using 100% audited financial statements and zero stock-price inputs.
Composite Formula
Quality Score = (30% × Revenue Growth Rank) + (30% × Operating Profit Rank) + (20% × Gross Margin Rank) + (20% × 1-Year R&D Payback Rank)
Each of the four pillars is scored as a 0 to 100 percentile rank across all 131 software companies (100 = highest in the index, 50 = middle of the pack, 0 = lowest). Ties receive the averaged percentile.
Plain-English question: Are customers buying meaningfully more of this company's software than they did last year?
Calculation: (Latest Fiscal Year Revenue minus Prior Fiscal Year Revenue) divided by Prior Fiscal Year Revenue.
Plain-English question: Does the core business generate real profit after paying all bills, engineers, and 100% of employee stock-based compensation?
Calculation: GAAP Operating Income divided by Revenue. Using operating income rather than bottom-line net income prevents one-time accounting tax credits or non-operating gains from inflating a company's profit score.
Plain-English question: Out of every $1 of customer sales, how many cents are left over after paying direct cloud hosting, support, and delivery costs?
Calculation: Gross Profit divided by Revenue. High-margin software retains 70 to 85 cents on the dollar to fund future products and shareholder profit.
Plain-English question: When management spent $1 on research and development last year, how much new gross profit did that investment create this year?
Calculation: (Gross Profit This Fiscal Year minus Gross Profit Prior Fiscal Year) divided by Prior-Year R&D Expense. Rewards productive innovation rather than raw cash burn.
Top-tier compounders combining healthy customer revenue growth, true GAAP operating profitability after employee stock grants, strong gross margins, and productive R&D payback.
Durable software businesses with above-average operating economics across most pillars, even if one dimension (such as mature growth or mid-tier payback) is moderate.
Middle-of-the-pack software companies balancing solid strengths in one area against slower growth, narrower operating margins, or lower R&D efficiency in another.
Below-average performers facing low profitability, sluggish growth, or poor return on R&D. Money-losing companies with shrinking revenue or operating losses worse than -40% are capped here.
Bottom-tier software companies experiencing severe operating losses, weak gross margins, or negative payback on product investment.
To ensure money-losing cash burners never receive a Neutral or Strong rating simply because one isolated metric looks high, two automatic caps apply:
Suppose a profitable software company ranks in the 90th percentile on Revenue Growth, 80th on Operating Profit, 70th on Gross Margin, and 60th on R&D Payback:
0.30(90) + 0.30(80) + 0.20(70) + 0.20(60) = 77.0 (Strong)
Great companies are not always great stock buys at any price. We keep business quality and share-price valuation separate so you can see both clearly.
The Quality Rating measures how healthy and productive the business is today based strictly on customer revenue growth, GAAP operating margins, gross margins, and R&D payback. It never changes just because the stock market had a volatile week.
A Discounted Cash Flow (DCF) model estimates what one share of the business is reasonably worth in dollars by projecting 5 years of cash generation, subtracting employee stock-based compensation and ongoing share dilution, adjusting for cash and debt on the balance sheet, and discounting future cash back to today.
How to use both together: Look for high-quality businesses (Leader or Strong scores of 60 to 100) trading near or below a sensible 5-year DCF Fair Value, and exercise caution when a Weak or Laggard company looks optically cheap on sales multiples while burning shareholder cash through heavy dilution. You can test your own growth and margin assumptions for any covered ticker for free on /model.
Every published score passes automated accounting checks and operator verification between our internal ratings workbench and public pages.
Revenue, gross profit, R&D, GAAP operating income, stock-based compensation, operating cash flow, capital expenditures, cash, debt, and diluted shares are extracted directly from audited 10-K and 10-Q schedules rather than third-party media summaries.
Before any release can be published, automated gates check for stale filings (>15 months), missing prior-year R&D baselines, GAAP tax-credit distortions, negative revenue anomalies, and exact score-to-band mathematical agreement.
Once verified, a single versioned release powers Portfolio & Ratings, Stock Profile pages, Research headers, and Excel exports simultaneously so a company never displays conflicting scores across different pages.
How our quantitative index, interactive financial models, and written equity research fit together.
Every eligible company receives its 0 to 100 Quality Rating, 4-pillar percentile breakdown, and status band first. 8 sample software companies are open in full preview for everyone.
Every covered ticker is wired into our interactive 3-statement financial model and 5-year DCF calculator on /model, including a free 1-sheet Income Statement Excel download.
Written company underwriting notes and visual slide decks are published only after financial schedules and ratings pass verification. Newly published notes stay open for 7 days.
Every public software company currently admitted to the Golden Door Software Index across all six software categories. Select any ticker to inspect its Stock Profile and interactive 3-statement financial model.
A company's business quality and its stock price are two separate questions. Excluding share prices from the 0 to 100 Quality Rating prevents overhyped stocks from receiving high business scores simply because their shares rallied, and lets everyday investors compare business health independently from valuation.
An honest index must include poor performers alongside market leaders so investors can see what Weak and Laggard businesses look like in real numbers. Removing struggling software companies would create survivorship bias.
Yes. A score of 80 or above means the business itself is growing, profitable, and productive with product engineering dollars. You still compare the current share price against our 5-year DCF Fair Value to see whether that quality is already priced in.
Every revenue, gross profit, operating income, stock-based compensation, cash flow, and share count figure traces directly to official 10-K annual and 10-Q quarterly filings reported in US dollars.
Every active constituent in our software index is listed in Section 6 on this page by software category and ticker, and each ticker links directly to its Stock Profile and interactive 3-statement financial model.
Published by Golden Door Asset for informational and educational research purposes only. Nothing on this page or across our ratings and models constitutes individualized investment advice or a recommendation to buy or sell any security.
