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

Hello!
I am Paponyan🌹🌳, a corporate accountant.

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

" "💰Money Trees" and score them using a proprietary evaluation system.

In this article, I have organized:

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

into a "definitive guide" compiled like a dictionary.

The concept of "60 points for growth, 20 points for safety, and 20 points for profitability" that appears in individual stock analysis articles is also structured so that you can understand the overall picture by reading this article.

📝 Update History

August 2026: Revised the evaluation criteria for growth potential.

To more appropriately evaluate a company's long-term growth potential, I have reviewed the evaluation method for "Growth Potential (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, I will calculate the long-term growth trend using data from all of the past 10 periods.

Also, to emphasize not just overall corporate growth but growth per share, sales have been changed to "sales per share." Regarding profits, I will also emphasize core business profit growth and evaluate "operating profit per share."

Regarding dividends, the evaluation method has been changed to two perspectives: "growth rate of dividends 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 the evaluation scores calculated based on the current criteria.

✅ What is a "💰Money Tree"?

First, the definition of
"💰Money Tree" as I see it is as follows.

☑️Definition:
Stocks of companies expected to see growth in revenue, profit, and dividends over the long term.

☑️Benefits:
Earn stable dividend income through long-term holding.
→ Becomes a source of income to support future life beyond just a pension.

☑️Key Point:
❗️ Do not choose based solely on 'high dividend yield'!
→ 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 corporate profitability and safety!

✅ What are the evaluation criteria for a 'Money Tree'?

So, from what perspective should you evaluate a company? I will explain the criteria next.

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

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

📕 (1) Growth (Points: 60)

Now, let's look at the specific evaluation criteria.

For a 'Money Tree', we prioritizehow much the performance and dividends have grown over the long term during the past 10 years.

Regarding sales, operating profit, and dividend amounts, rather than simply comparing the figures from 10 years ago to the present,we calculate the long-term growth trend from the trends of all the past 10 periods and evaluate based on that annual growth rate.

☑️Sales Growth Rate: (Points: 20)
Points are added according to the annual growth rate calculated from the trend ofsales per shareover the past 10 periods.
📌 10% or more: +😄20 points, thereafter-1 point for every 0.5% decrease

☑️Profit Growth Rate: (Points: 20)
Points are added according to the annual growth rate calculated from the trend ofoperating profit per shareover the past 10 periods.
📌 10% or more: +😄20 points, thereafter-1 point for every 0.5% decrease

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

☑️Dividend Growth Rate: (Points: 10)
Points are added according to the annual growth rate calculated from the trend ofdividends per shareover the past 10 periods.
📌 10% or more: +😄10 points, thereafter-1 point for every 1% decrease

❗️For fiscal years where the dividend amount is 0 yen, it will be calculated as 1 yen.

☑️Number of dividend increases: (Points: 10)
We evaluate dividend increases or 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 safety and profitability of a company, it is important to check them. Each is evaluated based on the following criteria.

📕(2) Safety (Points: 20)

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

☑️Current ratio: (Points: 5) • Calculation formula
Current ratio = Current assets (yen) ÷ Current liabilities (yen)

• What does it represent? The current ratio indicates how much a company can cover its short-term liabilities with current assets.

• Point If the current ratio is below 100%, there may be a problem with short-term debt repayment ability.

• Scoring criteria
120% or more📈 with 😄 +5 points. Thereafter, 1 point deducted for every 10% decrease.

☑️Equity ratio: (Points: 5) • Calculation formula
Equity ratio = Equity (yen) ÷ Total capital (yen)

• What does it represent? The equity ratio indicates the proportion of equity in total capital.

• Point Companies with a high equity ratio hold a lot of capital that does not require repayment, and have high financial stability.

• Scoring criteria 50% or more
📈 with 😄 +5 points. Thereafter, 1 point deducted for every 10% decrease.

☑️Fixed ratio: (Points: 5) • Calculation formula
Fixed ratio = Fixed assets (yen) ÷ Equity (yen)

• What does it represent? It indicates how much fixed assets are covered by equity that has no repayment obligation.

• Point If the fixed ratio is too high, fixed assets cannot be covered by equity alone, suggesting a reliance on borrowings, which is considered a high financial risk.

• Scoring criteria 50% or less
📉 with 😄 +5 points. Thereafter, 1 point deducted for every 20% increase.

☑️Net D/E Ratio: (Points: 5)
• Formula
Net D/E Ratio (Debt Equity Ratio, Debt-to-Equity Ratio)
= Net Interest-bearing Debt (JPY) ÷ Shareholders' Equity (JPY)
• What does it represent?
The Net D/E Ratio indicates the proportion of interest-bearing debt relative to shareholders' equity.
• Key Point
Companies with a low Net D/E Ratio have low reliance on borrowing and are financially stable.
• Scoring Criteria
0.5x or less📉 for 😄 +5 points
Thereafter, 1 point deducted for every 0.1 increase

❗️Net Interest-bearing Debt = Interest-bearing Debt - Cash and Deposits

📕(3) Profitability (Points: 20)

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 from the most recent three years.

☑️Operating Profit Margin: (Points: 5)
• Formula
Operating Profit Margin = Operating Profit (JPY) ÷ Net Sales (JPY)
• What does it represent?
The operating profit margin indicates the earning power of a company's core business activities.
• Key Point
Companies with a high operating profit margin can be judged as having high and stable earning power from their core business.
• Scoring Criteria
10% or more📈 for 😄 +5 points
Thereafter, 1 point deducted for every 1% decrease

❗️For companies that do not disclose operating profit, operating profit is calculated by methods such as deducting selling, general and administrative expenses from gross profit.

☑️ROA (Return on Assets): (Points: 5)
• Formula
ROA (Return On Assets, Return on Total Assets)
= Ordinary Profit (JPY) ÷ Total Assets (JPY)
• What does it represent?
ROA indicates how efficiently a company is using its total assets to generate profit.
• Key Point
A high ROA indicates high efficiency in asset utilization.
• Scoring Criteria
10% or more📈 for 😄 +5 points
Thereafter, 1 point deducted for every 1% decrease

❗️For companies that do not disclose ordinary profit, profit before income taxes is used as a substitute.

☑️ROE (Return on Equity): (Points: 5)
• Formula
　ROE (Return On Equity, Return on Equity)
　 = Net Income (JPY) ÷ Shareholders' Equity (JPY)
• What does it represent?
　ROE indicates how efficiently a company has used the capital invested by shareholders to generate profit.
• Key Points
　A high ROE indicates efficient use of shareholder capital. However, since ROE can also be inflated by excessive use of interest-bearing debt, attention must also be paid to financial stability.
• Scoring Criteria
　10% or higher📈 for 😄 +5 points
　Thereafter, 1 point deduction for every 1% decrease

☑️ROIC (Return on Invested Capital): (Points: 5)
• Formula
　ROIC (Return On Invested Capital, Return on Invested Capital)
　= NOPAT (JPY) ÷ (Shareholders' Equity + Net Interest-Bearing Debt) (JPY)
• What does it represent?
　ROIC indicates how efficiently a company is using all the capital invested in its business to generate profit.
• Key Points
　Companies with a high ROIC demonstrate efficient use of capital raised from shareholders and creditors.
• Scoring Criteria
　10% or higher📈 for 😄 +5 points
　Thereafter, 1 point deduction for every 1% decrease

❗️NOPAT (Net Operating Profit After Tax)
　= Operating Profit × (1 - Effective Tax Rate)

3️⃣ Other Indicators (No points)

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

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

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

• Key Points
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.

• Key Points
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 (JPY) ÷ Daily Sales (JPY)

• What does it represent?
It indicates the time it takes to collect payment after selling goods or services.


☑️Days Inventory Outstanding (Days)
• Formula
Days Inventory Outstanding = Inventory (JPY) ÷ Daily Cost of Goods Sold (JPY)

• What does it represent?
It indicates the number of days required from purchasing or producing goods until they are sold.


☑️Accounts Payable Turnover Period (days)
• Calculation Formula
Accounts Payable Turnover Period = 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 goods or raw materials.

📒Other Indicators-2 (PER/PBR)

☑️PER, PBR
• Calculation 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 showing how many times a company's stock price is valued relative to its EPS. It serves as a benchmark for measuring how much investors expect from the company's earning power.

PBR indicates 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 valuation of a company's 'liquidation value'.

• Points
If the PER is too high, the stock price may be overvalued, and investment recovery could take time. Conversely, if the PER is extremely low, market expectations may be low, suggesting potential 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)
• Calculation Formula
EPS (Earnings Per Share) = Net Income (yen) ÷ Average Number of Shares During the Period
BPS (Book-value Per Share) = Shareholders' Equity (yen) ÷ Total Number of Shares Issued at End of Period

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

• Points
Companies with stable EPS growth can be judged as having high earning power and continuously increasing value for shareholders. This also raises expectations for dividend increases.

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

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

☑️Dividend Yield
• Calculation 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 income can be obtained relative to the stock price.

• Points
If the dividend yield is too high, dividends may have been forced upward. It is also important to check the background of the stock price, as high yields can sometimes result from a decline in the stock price.

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

• What does it represent?
The dividend payout ratio indicates what portion of a company's earned profit is distributed to shareholders as dividends.

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

☑️Dividend on Equity Ratio
• Formula:
Dividend on Equity Ratio (DOE) = Dividend per share (yen) ÷ BPS (yen)DOE = Dividend per share (yen) ÷ BPS (yen)

• What does it represent?
DOE indicates how much of a company's net assets are being distributed as dividends.

• Key Point
Companies with a stable DOE are expected to see their dividends grow steadily in line with the increase in net assets.

☑️Total Shareholder Return
• Formula:
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)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 shows 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 Point
Companies with a 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🌹🌳