What is a 'Money Tree'? — A Complete Guide to Definitions, Evaluation Criteria, and Related Indicators (Financial Industry Edition)

Hello!
I am Paponyan🌹🌳.

I define stocks of companies that can be expected to have the following in the future as
・📈 Revenue growth
・📊 Profit growth
・💹 Dividend growth

as “💰Money Tree” and score them using a proprietary evaluation system.

In this article, I have organized an evaluation model for the financial industry, including banks, securities, insurance, and leasing,
based on characteristics that differ from general companies.

The content is, similar to the general company edition,

✅ What is a “💰Money Tree” (Definition)
✅ How it is evaluated (100-point evaluation criteria)
✅ Key indicators used for evaluation (formulas, significance, points to watch, scoring criteria)
✅ Related indicators to deepen judgment (formulas, significance, points to watch)

organized as a “reference guide” that summarizes everything like a dictionary.

Among these, the following items have been redesigned for the financial industry:
・ How it is evaluated (100-point evaluation criteria)
・ Key indicators used for evaluation (formulas, significance, points to watch, scoring criteria)

📝 Update History

August 2026: Revised growth evaluation criteria.

To better evaluate a company's long-term growth potential, I have reviewed the evaluation method for “Growth (60 points).”

Previously, the past 10 years were divided into the first 5 years and the last 5 years to evaluate the growth rate of sales and net income, but after the revision, the long-term growth trend is calculated using data from all past 10 periods.

Also, to emphasize growth per share rather than just the growth of the entire company, sales have been changed to “sales per share.”Regarding profits, I also emphasize the growth of core business profits and will evaluate “operating profit per share.”

Regarding dividends, the method has been changed to evaluate from two perspectives: “growth rate of dividend per share (10 points)” + “track record of dividend increases and maintenance (10 points).”

*Due to this revision, the evaluation scores of “Money Trees” published in the past may differ from those calculated under the current criteria.

🧐 Why can't the four financial industries be evaluated correctly with the “conventional evaluation criteria”?

Among the 33 sectors on the Tokyo Stock Exchange, the following four sectors cannot be evaluated appropriately using the same criteria as general companies.

☑️ Banking
☑️ Securities and Commodity Futures Trading
☑️ Insurance
☑️ Other Financial Services

🔍 Why can't they be evaluated correctly with conventional criteria?

The financial industry is a
business that generates revenue by utilizing funds (liabilities) entrusted by others.

They use deposits, insurance premiums, and funds associated with securities transactions as capital to provide loans and manage assets, earning interest and fees.

In other words,

👉 General companies: Borrowing is a “risk”
👉 Financial industry : Liabilities are the “source of business”

There is a structural difference.

✏️Standard Business Models in the Financial Industry

☑️Banking
Generates revenue from the spread (interest margin) between lending rates and deposit rates by lending out funds collected through deposits, etc.
→ The scale of loan balances and interest rate levels significantly impact earnings.

☑️Securities and Commodity Futures Trading
Generates revenue through trading and asset management in addition to brokerage commission income.
→ Performance is easily influenced by market conditions (stock prices and trading activity).

☑️Insurance
Generates revenue from insurance premium income and asset management gains.
→ The balance between insurance premiums and insurance payouts, as well as risk management, is crucial.
　
☑️Other Financial Services
Generates revenue through interest and fees via leasing, credit, and lending.
→ Easily influenced by credit risk and economic trends.

💡Why Financial Structures Mean 'Conventional Criteria Cannot Evaluate Them'

For example, the following indicators, which are emphasized for general companies, are interpreted quite differently in the financial industry.

● Current Ratio
Usually: An indicator to measure short-term solvency
→ In banking, deposits are recorded as short-term liabilities, so a low ratio is not a problem

● Net Debt-to-Equity Ratio
Usually: An indicator showing reliance on debt
→ In banking, debt is a prerequisite for business, so a high ratio does not immediately indicate risk

✨ Conclusion

As shown, the financial industry differs significantly from general companies in all of the following:

✔ Business model
✔ Financial structure
✔ Meaning of indicators

Therefore, I have determined that to properly evaluate a '💰Cash Cow',

an evaluation standard specific to the financial industry is essential.
evaluation criteria specific to the financial industry are essentialis essential.

✅What is a '💰Cash Cow'?

First, my definition of a
'💰Cash Cow' is as follows.

☑️Definition:
Stocks of companies that can be expected to see growth in revenue, profit, and dividends over the future.

☑️Benefits:
You can earn stable dividend income through long-term holding.
→ It becomes a source of income to support your future life beyond just a pension.

☑️Key Point:
❗️Do not choose just because the 'dividend yield is high'!
→ Even if the current yield is low, if continuous dividend growth is expected, the yield on the initial investment will become high in the future.
👍Choose by prioritizing the company's profitability and safety!

✅What are the evaluation criteria for a '💰Cash Cow'?

So, from what perspective should you identify such companies? I will share those criteria next.

I have decided to evaluate companies from the following two perspectives and quantify them on a100-point scale.

I have changed the evaluation criteria for each of the following four industries.

☑️Banking

☑️Securities and Commodity Futures Trading

☑️Insurance

☑️Other Financial Services

1️⃣Have performance and dividends grown over the past 10 years? (Points: 60)

📕(1) Growth (Points: 60) [Common]

Now, let's look at the specific evaluation criteria. For a '💰Cash Cow', we emphasize

how much performance and dividends have grown in the long term over the past 10 years.

For revenue, operating profit, and dividend amounts, we do not simply compare the figures from 10 years ago with the current ones; instead, we calculate the long-term growth trend from the performance of all the past 10 periods and evaluate based on that annual growth rate.

☑️Revenue Growth Rate: (Points: 20)
Points are added based on the annual growth rate calculated from the trend of revenue per share over the past 10 periods. 📌
10% or more: +😄20 points, and thereafter -1 point for every 0.5% decrease

☑️Profit Growth Rate: (Points: 20)
Points are added based on the annual growth rate calculated from the trend of operating profit per share over the past 10 periods. 📌
10% or more: +😄20 points, and thereafter -1 point for every 0.5% decrease

❗️For fiscal years where operating profit per share is 0 yen or less, we calculate it as 1 yen to reflect the impact on the long-term growth trend.

☑️Dividend Growth Rate: (Points: 10)
Points are added based on the annual growth rate calculated from the trend of dividends per share over the past 10 periods. 📌
10% or more: +😄10 points, and thereafter -1 point for every 1% decrease

❗️For fiscal years where the dividend amount is 0 yen, we calculate it as 1 yen.

☑️Number of dividend increases: (Points: 10)
We evaluate dividend increases or dividend maintenance based on the past 10 dividend records.
📌 Dividend increase/maintenance: +😄1 point/year

❗️Commemorative dividends are excluded from the evaluation.

2️⃣Will earnings and dividends continue to grow in the future? (Points: 40)

Future growth potentialTo evaluate , it is important to check the company's safety and profitability. Each is evaluated based on the following criteria.

📕(2) Safety (Points: 20) [By Industry]

Regarding safety, to accurately grasp the company's current financial situation, we evaluate using the latest financial results.

The evaluation criteria are changed for each of the following four industries.

✅Banking Industry

☑️Non-performing loan ratio (NPL ratio): (Points: 10)
• Scoring criteria
0.4% or less 📉 gives 😄 +10 points
1 point deduction for every 0.1% increase thereafter
☑️Common Equity Tier 1 ratio (CET1 ratio): (Points: 10)
• Scoring criteria
14% or more 📈 gives 😄 +10 points
1 point deduction for every 0.5% decrease thereafter

✅Securities and Commodity Futures Trading Industry

☑️Consolidated Liquidity Coverage Ratio (LCR ratio): (Points: 10)
• Scoring criteria
200% or more 📈 gives 😄 +10 points
1 point deduction for every 10% decrease thereafter
☑️Common Equity Tier 1 ratio (CET1 ratio): (Points: 10)
• Scoring criteria
18% or more 📈 gives 😄 +10 points
1 point deduction for every 1% decrease thereafter

✅Insurance Industry

☑️Solvency Margin Ratio (20 points)
• Scoring criteria
600% or more 📈 gives 😄 +20 points
1 point deduction for every 30% decrease thereafter

✅ Other Financial Services

☑️ Equity Ratio: (Points: 10 points)
• Scoring Criteria
　30% or higher📈 for 😄 +10 points
　Thereafter, 1 point deducted for every 3% decrease
☑️ Net Debt-to-Equity Ratio: (Points: 10 points)
• Scoring Criteria
　1.0x or lower📉 for 😄 +10 points
　Thereafter, 1 point deducted for every 0.1 increase

✏️ Calculation formulas and significance of safety indicators

☑️ Non-Performing Loan (NPL) Ratio
• Calculation Formula
　NPL Ratio = Non-Performing Loans (JPY) ÷ Total Loans (JPY)
• What does it represent?
　The NPL ratio is an indicator showing the percentage of loans made by a bank that are considered 'bad debts' and difficult to recover.
　The lower this figure, the better the credit status of the borrowers, and the lower the risk of loan losses.
• Key Points
　Generally, exceeding 1% is considered high risk.
　Conversely, 0.4% or lower can be evaluated as excellent.

☑️ Common Equity Tier 1 (CET1) Ratio
• Calculation Formula
　CET1 Ratio = CET1 (JPY) ÷ Total Risk-Weighted Assets (JPY)
• What does it represent?
　The CET1 ratio is an indicator showing how much of the most reliable 'core capital' (such as shareholder equity and retained earnings) held by a bank or securities firm is available against risk assets.
　It is an important safety indicator for measuring financial soundness and the robustness of equity capital.
• Key Points
　The higher the CET1 ratio, the greater the management strength, and the better the ability to withstand unexpected losses.

☑️ (Reference) Tier 1 Ratio
• Calculation Formula　
　Tier 1 Ratio = Tier 1 (CET1 + AT1) ÷ Total Risk-Weighted Assets (JPY)
• What does it represent?
　The Tier 1 ratio is an indicator showing how much 'basic equity capital,' which includes CET1 (the highest quality capital) plus AT1 (Additional Tier 1 capital), is available against risk assets.
　AT1 includes hybrid securities such as perpetual subordinated bonds that are recognized as capital under certain conditions.
• Key Points
　Although the quality of capital is slightly lower compared to the CET1 ratio, the Tier 1 ratio is still useful as a supplementary indicator showing the core safety of a bank or securities firm's capital.

☑️ (Reference) Total Capital Ratio
• Calculation Formula　
　Total Capital Ratio = (Tier 1 + Tier 2) ÷ Total Risk-Weighted Assets (JPY)
• What does it represent?
　The Total Capital Ratio is an indicator showing the 'comprehensive strength of equity capital,' which includes Tier 1 (basic capital) plus Tier 2 (supplementary capital), available against risk assets.
　Tier 2 includes subordinated bonds, revaluation reserves, and loan loss provisions.
• Key Points
　The Total Capital Ratio is an indicator that captures the capital of a bank or securities firm in the broadest sense. While inferior to Tier 1 in terms of quality, it is useful for seeing the 'big picture' of a bank or securities firm's future loss-absorbing capacity.

☑️ Liquidity Coverage Ratio (LCR)
• Calculation Formula
　LCR = High-Quality Liquid Assets (JPY) ÷ Estimated 30-Day Cash Outflow (JPY)
• What does it represent?
　The LCR (Liquidity Coverage Ratio) is an indicator showing 'whether funds can be maintained for one month in the event of a sudden outflow of funds.' By dividing high-quality, easily liquidated assets such as cash, deposits, and government bonds by the estimated cash outflow over 30 days, one can evaluate the ability to respond to short-term liquidity risk.
• Key Points
　Generally, 100% or higher is considered the minimum standard by regulatory authorities, and exceeding this indicates the ability to meet short-term payment obligations. In particular, for securities firms that engage in proprietary trading or margin trading, short-term liquidity risk management is extremely important.

☑️ Solvency Margin Ratio
• Formula
　Solvency Margin Ratio = Total Solvency Margin (yen) ÷ (Total Risk Amount ÷ 2) (yen)
　What is the Total Solvency Margin?
　Surplus capital held by an insurance company to prepare for 'what-ifs' (equity, policy reserves, contingency reserves, subordinated bonds, etc.)
　What is the Total Risk Amount?
　The sum of all risks (natural disasters, unexpected insurance payouts, interest rate fluctuations, stock price declines, etc.)
• What does it represent?
　The Solvency Margin Ratio (SM Ratio) is an indicator showing how much an insurance company can withstand events that exceed normal predictions (i.e., sudden risks) such as natural disasters, pandemics, or large-scale accidents. It is a soundness indicator unique to the insurance industry that evaluates whether a company can handle 'unexpected' losses with a margin, in addition to the expected payments from premiums collected from policyholders.
• Key Points
　200% or higher is considered the minimum standard by the Financial Services Agency, and falling below this triggers early corrective measures. Generally, 300% or higher is considered sound, and 500% or higher is judged to have significant leeway. A high Solvency Margin Ratio is directly linked to the depth of insurance payment capacity and the company's reliability.

☑️ Equity Ratio
• Formula
　Equity Ratio = Equity (yen) ÷ Total Capital (yen)
• What does it represent?
　The equity ratio indicates the proportion of equity within total capital.
• Key Points
　In other financial industries, interest-bearing debt is often strategically utilized to expand lease assets and loan receivables, so a high equity ratio is not necessarily always good. However, companies that secure equity above a certain level are evaluated as excellent in terms of financial soundness and creditworthiness, and are resilient to the deterioration of the external environment.

☑️ Net D/E Ratio
• Formula
　Net D/E Ratio (Debt Equity Ratio, Debt-Equity Ratio)
　 = Net Interest-Bearing Debt (yen) ÷ Equity (yen)
• What does it represent?
　The Net D/E Ratio indicates the proportion of interest-bearing debt relative to equity.
• Key Points
　Since other financial industries use borrowing as a source of funds for leases and loans, a certain level of debt utilization is a prerequisite. However, if the Net D/E Ratio is too high, caution is required as concerns regarding cash flow and credit ratings may arise. Conversely, if it is too low, there is a possibility that leverage for growth is not being utilized, so an appropriate balance is important.
❗️Net Interest-Bearing Debt = Interest-Bearing Debt - Cash and Deposits

📕(3) Profitability (Points: 20) [Common]

Regarding profitability, to reduce fluctuations in profit and loss for each fiscal year and accurately evaluate the company's inherent earning power, we use the average of the financial results for the most recent three years.

☑️ Ordinary Profit Margin: (Points: 10)
• Formula
　Ordinary Profit Margin = Ordinary Profit (yen) ÷ Ordinary Revenue (yen)
• What does it represent?
　An indicator showing how efficiently a company generates profit from its core business.
• Key Points
　While operating profit margin is used for general companies, the ordinary profit margin is a more realistic indicator for the financial industry because they do not disclose 'operating profit.' The higher it is, the more stably the company is generating profit from its daily operations.
• Scoring Criteria
　20% or higher📈 with 😄 +10 points
　Thereafter, 1 point deducted for every 2% decrease

☑️ROA (Return on Assets): (Points: 5)
• Formula
ROA (Return On Assets, Return on Total Assets)
= Ordinary Profit (yen) ÷ Total Assets (yen)
• What does it represent?
ROA indicates how efficiently a company uses its total assets to generate profit.
• Key Point
A high ROA indicates high asset utilization efficiency.
• Scoring Criteria
10% or higher📈 with 😄 +5 points
Thereafter, 1 point deducted for every 1% decrease
❗️In the financial industry, ROA tends to be lower than in general companies, so the scoring criteria have been adjusted.

☑️ROE (Return on Equity): (Points: 5)
• Formula
ROE (Return On Equity, Return on Equity)
= Net Income (yen) ÷ Shareholders' Equity (yen)
• What does it represent?
ROE indicates how efficiently a company uses the capital invested by shareholders to generate profit.
• Key Point
A high ROE indicates efficient use of shareholder equity. However, since ROE can also be inflated by excessive use of interest-bearing debt, financial safety must also be considered.
• Scoring Criteria
10% or higher📈 with 😄 +5 points
Thereafter, 1 point deducted for every 1% decrease
❗️The scoring criteria have been adjusted to be suitable for the financial industry.

3️⃣Other Indicators (No points)

📒Other Indicators-1 (Total Asset Turnover / CCC)

☑️Total Asset Turnover
• Formula
Total Asset Turnover = Net Sales (yen) ÷ Total Assets (yen)

• What does it represent?
It indicates how efficiently a company uses its total assets to generate sales.

• Key Point
A high total asset turnover indicates efficient asset management.

☑️CCC
• Formula
CCC (Cash Conversion Cycle) = Days Sales Outstanding + Days Inventory Outstanding - Days Payable Outstanding

• What does it represent?
It indicates the period during which cash circulates from payment to collection. The shorter it is, the more efficient it is.

• Key Point
Companies with a short CCC have efficient cash flow management and more flexibility in their funding.

☑️Days Sales Outstanding (days)
• Formula
Days Sales Outstanding = Accounts Receivable (yen) ÷ Sales per day (yen)

• What does it represent?
It indicates the time taken from selling a product or service until the payment is collected.


☑️Days Inventory Outstanding (days)
• Formula
Days Inventory Outstanding = Inventory (yen) ÷ Cost of Goods Sold per day (yen)

• What does it represent?
It indicates the number of days required from purchasing or producing a product until it is sold.


☑️Days Payable Outstanding (days)
• Formula
Days Payable Outstanding = Accounts Payable (yen) ÷ Cost of Goods Sold per day (yen)

• What does it represent?
It indicates the number of days required to pay for the purchase of products or raw materials.

📒Other Indicators-2 (PER / PBR)

☑️PER, PBR
• Formula
PER (Price Earnings Ratio) = Stock Price (yen) ÷ EPS (yen)
PBR (Price Book-value Ratio) = Stock Price (yen) ÷ BPS (yen)

• What does it represent?
PER is an indicator that shows how many times a company's stock price is valued relative to its EPS. It serves as a benchmark to measure how much investors expect from the company's earning power.

PBR shows how many times a company's stock price is valued relative to its BPS. It is used as an indicator to measure the market's evaluation of a company's 'liquidation value'.

• Key Points
If the PER is too high, the stock price may be overvalued, and it may take a long time to recover the investment. On the other hand, if the PER is extremely low, market expectations may be low, and there may be doubts about the company's future prospects.

Companies with a PBR of 1x or less may be considered undervalued, but caution is required as there may be issues with their financial structure or profitability.

☑️EPS, BPS (yen)
• Formula
EPS (Earnings Per Share) = Net Income (yen) ÷ Average Number of Shares During the Period
BPS (Book-value Per Share) = Net Assets (yen) ÷ Number of Shares Issued at the End of the Period

• What does it represent?
EPS is an indicator that shows how much net income a company has per share.
BPS is an indicator that shows how much net assets a company has per share.

• Key Points
Companies with stable EPS growth can be judged as having high earning power and continuously increasing value for shareholders. This also allows for expectations of increased dividends.

Companies with steadily increasing BPS are evidence of growth while maintaining solid retained earnings. In particular, companies with a high equity ratio and a sound financial base are highly likely to maintain dividends over the long term.

📒Other Indicators-3 (Dividend Yield, Dividend Payout Ratio, DOE, TSR)

☑️Dividend Yield
• Formula
Dividend Yield = Annual Dividend per Share (yen) ÷ Stock Price (yen)

• What does it represent?
Dividend yield indicates the ratio of annual dividends to the investment amount. It is an important indicator for measuring how much dividend can be obtained relative to the stock price.

• Key Points
If the dividend yield is too high, the dividend may have been forced up. Also, since high dividends can occur due to a drop in stock price, it is important to check the background of the stock price.

☑️Dividend Payout Ratio
• Formula
Dividend Payout Ratio = Dividend per Share (yen) ÷ EPS (yen)

• What does it represent?
The dividend payout ratio shows how much of the profit a company has earned is being distributed to shareholders as dividends.

• Key Points
If the dividend payout ratio is extremely high, retained earnings may be insufficient, making it difficult to maintain future dividends.

☑️Dividend On Equity Ratio
• Formula
Dividend On Equity Ratio (Dividend On Equity ratio, DOE) = Dividend per Share (yen) ÷ BPS (yen)

• What does it represent?
DOE shows how much of its net assets a company is distributing as dividends.

• Key Points
For companies with a stable DOE, it is expected that dividends will grow steadily in line with the increase in net assets.

☑️Total Shareholder Return
• Formula
Total Shareholder Return (Total Shareholder Return, TSR) = (Stock Price (at end of current period) + Total Dividends over the past 5 years (yen)) ÷ Stock Price (at end of 6 fiscal years ago) (yen)

• What does it represent?
TSR indicates the comprehensive yield, combining capital gains from stock price appreciation and dividends. It is an indicator for evaluating investment returns from a long-term perspective.

• Key Points
Companies with high TSR provide shareholder value through both stock price growth and dividends.

Thank you for reading this far!🙇‍♂️
I hope this serves as a hint for your asset formation and portfolio design.😊

＼Follow & Like, it encourages me!💖／
Paponyan🌹🌳