What is big five?
- The big five are ROIC, sales growth, EPS growth, equity growth, and free cash flow growth.
- They verify a moat compounds at 10% or more per year.
- Check each metric for at least 10% annual growth over a decade.
- All five must pass; one strong number isn't enough.
- The big five predict future stock performance better than price.
What is big five?
The big five are the five financial metrics you check before buying a stock: ROIC, sales growth, EPS growth, equity growth, and free cash flow growth. They tell you if a company has a durable moat.
The big five aren't about price. They're about the business. You'll find the term across sports, psychology, and tech, but for investors it means these five growth numbers. They say nothing about the ticker and everything about the engine behind the shares.
The five metrics Rule #1 uses to verify a moat compounds at 10% or more. If a company can't hit that standard, you walk away. That bar screens out most stocks before they ever earn a second look.
How to use the big five
Check each metric for 10% annual growth over the last 10 years. If any one fails, skip the stock. The big five work together; one strong number isn't enough. Do the same test across all five before you decide.
Pull the numbers from annual filings. You want a decade of history. Ten years of consistent growth shows a lasting moat; a few good quarters does not. The longer the record, the more reliable the read.
You need all five growing. ROIC shows management skill, sales growth shows demand, EPS growth shows profit per share, equity growth shows net worth, and free cash flow growth shows real cash.
Why the big five matter
They reveal a moat, which protects profits from competitors. Without it, growth dies. The big five are forward-looking: past growth predicts future growth. A business that keeps compounding usually keeps compounding, and that persistence is what you are buying.
That's the Rule #1 way. You don't guess, you measure. If they compound at 10% or more, you buy. If not, you pass. Discipline removes emotion from the decision, no gut feeling, just the numbers.