We humans love rankings. In a world of chaos, we like the fictional supposition that life and all of its messy data can be corralled into neat silos. We love our top 10 song lists and rankings of the best colleges.

Earnings season provides the perfect data set to create meaningful rankings. Recently, I introduced a rating system for the stocks in the portfolio of Investing Daily’s sister publication, Growth Stock Strategist. We are applying the same system to the Profit Catalyst Alert Portfolio and will update it each quarter.

The Profit Catalyst Alert Portfolio did well in the first quarter with all but one company earning a better-than-average grade. (See table on page 4.)

Assigning a hard numerical score to each attribute of a company’s earnings report keeps me honest. Even the most calculating analyst can become emotionally attached to a stock, so grading the results helps me stay disciplined and impartial about a company’s earnings prospects.

With a hard score, there’s no weaseling, so I’m sharing with you my earnings scorecard.

What’s the Score?

There are three components that I score in each earnings report. The first and most obvious is whether a company beat earnings estimates for the current quarter. The degree to which it beats these estimates is important. A lackluster 2% “beat” is not big news, but beating estimates 20% or more means fundamentals are significantly better than the experts expected.

The second component is whether the company beat revenue estimates. Although it isn’t critical for a company to beat estimates to maintain a solid grade, it is an important measure to watch. Robust revenue growth is the healthiest path to beating earnings estimates.

When a company misses revenue estimates, I prefer to see earnings that beat estimates because of lower expenses or higher product margins instead of lower tax rates or one-time asset sales, occurrences that are unlikely to be repeated.

The third and often most relevant metric is if the company’s future guidance is better or worse than expected. The stock market is a forward-looking animal, and even fabulous results for the current quarter can be washed out with an adverse outlook. Evaluating this metric is more art than science. Management’s track record for meeting previous guidance, the sustainability of the change and the amount the estimates increased by all help form the rating.

Raw Numbers

I will apply the rating system to each of Profit Catalyst’s stocks every earnings season. Each stock earns one point for every percentage point that earnings per share beat estimates. A company with an earnings miss is docked by the percentage points that the number is missed. Beating revenue estimates earns a company one point, and better-than-expected guidance gets it one or two points. An in-line quarter receives zero points, and missed revenue or mixed guidance each results in a one-point deduction.

The highest possible scores hover above 23, which is earned by beating estimates 20%, having higher-than-expected revenue and increasing guidance significantly. One final tweak is awarding two points if a company beats a number that was raised mid-quarter, the shorter time frame making it especially difficult to beat estimates at the end of the quarter.

I believe this method will keep our portfolio in crisp shape. There is little wiggle room for flimsy excuses and missed expectations regardless of my affinity for a stock.

Report Card Time

This year’s first-quarter earnings season was fairly tough for the market in general. According to FactSet, despite more than 70% of the companies beating estimates, almost 72% lowered future numbers. Only 50% of companies beat revenue estimates versus a five-year average of 56%. This comes as no surprise for anyone following the plateau on which the economy is bumping along. Robust revenue growth is hard to come by, and the bulk of earnings growth is the result of cost reductions.

The Profit Catalyst Alert Portfolio fared well during the first calendar quarter reporting season.

At the head of the class are Criteo and SolarEdge, with each earning an A+. Gold stars go to both for beating estimates 26% and 27%, respectively. Yet a tale of two stocks followed these spectacular numbers. Criteo, the ad delivery software company, saw its stock jump 8% since reporting stellar earnings. SolarEdge, with earnings that were no less brilliant, watched its stock fall 6% due to poor results from one of its customers.

Vera Bradley comes in next with an A-. The 7% drop in the share price since the earnings report does not reflect an earnings performance that beat estimates 20% or management’s solid guidance. At a time when most retailers, particularly those that are mall-based, have issued bearish guidance, Vera held firm with strong expectations. As investors sort through the retail wreckage and recognize Vera’s turnaround, the stock should move higher.

Charles River Labs earned a B+ and Brunswick a B-. Demand for Charles River’s clinical capabilities remains strong. Forward earnings should be solid as the company branches out into testing for bio-engineered agriculture. Because Brunswick just met estimates for both earnings and revenue, the only point the stock earned was for guidance. Revenue in Brunswick’s primary boat business, though, was solid, with fitness orders coming in a hair light. We expect fitness equipment to return to growth, and in any case we love that Brunswick has two businesses so that even if one takes a breather the company still prospers.

Lastly, Air Transport Group sat on the bottom rung with a C. I know we promised we won’t question the hard data, but I should note that the grade is primarily because the company missed earnings by a penny. The miss was due to higher expenses as the company revs up for its Amazon contract. We think that’s as good a reason as any for a small miss and love the potential for Air Transport now that Amazon is broadening its delivery wings.