Understanding target values for financial ratios
The 9 Golden Rules (GR2) Past Financial Performance table and Financial Metrics page now make it easier to understand each ratio and how it compares against Lincoln's preferred targets.
What's new
A new Target column has been added next to the Golden Rule 2 (GR2) Past Financial Performance table on the 9 Golden Rules page and on the Financial Metrics page. Targets are displayed for each metric and may differ by the GR2 Model assigned to the company.
Financial metric ratio names on both pages now include tooltips explaining what each metric means, how it is calculated, what sort of companies it is relevant for, and what values to look for.
Where to find the Target column
9 Golden Rules page – (GR2) Past Financial Performance table
Open a company and navigate to the 9 Golden Rules page.
Under the GR2 – Past Financial Performance section, you will see the Latest figures and the Targets for each financial metric listed.
Targets shown in the GR2 table follow the same logic as the Financial Metrics page and are Model-specific, tailored to the company's GR2 model.
Targets are defined using Lincoln's research framework and align with the broader 9 Golden Rules methodology.
Targets are not one-size-fits-all. They are model-specific and calibrated according to the company's GR2 model:
– Industrials (non‑cyclical and cyclical)
– Resources (including diversified resources, gold, energy, and materials)
– Financials (banks, insurers, diversified financials, and fund managers)
– REITs & Infrastructure
– ETFs & LICs
A few examples of how targets differ:
Return on Equity (ROE) – target is >14% & steady for Industrials and Resources (Models 1 and 2), but >10% & steady for Financials (Model 3). For REITs & Infrastructure, Fund Managers, ETFs and LICs, the target is blank because ROE is less meaningful or not calculated.
Net Debt to Equity – target is ≤200% across most models, but blank for banks and insurers where traditional gearing ratios do not apply.
Dividend Payout Ratio – target is <90% for most models, but blank for Fund Managers where capital is typically returned via different mechanisms.
PE Ratio – no target is displayed for any company, as PE varies widely by sector and growth stage and is best assessed in context.
Free Cash Flow per Share, EPS, NPAT – targets are >0 across applicable models, signaling positive and sustainable performance.
These targets are guidelines rather than hard rules and should always be considered in the context of sector norms, the company's business model, and its stage in the business cycle.
Financial Metrics page
Open a company and navigate to the Financial Statements icon in the grey toolbar, then click on the Financial Metrics tab.
For each financial metric, you will see the Latest value and a Target value where a Lincoln guideline applies.
If a target does not apply to that financial metric or company type (for example, some profitability ratios for banks and insurers), the Target field will appear blank.
Using the new tooltips
Each financial metric name now has a tooltip that you can view by hovering your mouse over the Financial metric ratio on the Financial Metrics page or in the GR2 table.
The tooltip typically covers:
What the metric is – easy to understand definition.
How it is calculated – a high‑level description of the formula or methodology.
What sort of companies it is relevant for – for example, whether it is more meaningful for capital‑intensive businesses, cyclical sectors, or income‑focused stocks.
What values to look for – guidance on interpreting the Current value relative to the Target (for example, "greater than 14% and steady is generally considered strong for industrial companies").
How to interpret Latest vs Target
When reviewing a company:
Compare the Latest value to the Target for each financial metric.
Values meeting or exceeding the Target (where "higher is better") or falling below the Target (where "lower is better", such as leverage ratios) generally indicate a more attractive financial profile for that type of company.
Values that are materially outside the Target range are a prompt to investigate further, rather than an automatic pass or fail.
For example:
A Industrial Model company with ROE above 14%, ROIC above 10%, and positive Free Cash Flow per Share is demonstrating strong and sustainable profitability.
A Resources Model company with Net Debt to EBITDA comfortably below 4 times and Net Debt to Equity below 200% is carrying a more conservative level of debt, which can be important in cyclical sectors.
A Financial Model company (bank) with strong Net Interest Margin and Return on Assets, but where metrics like Earnings Quality are not calculated due to the nature of bank accounting, should be assessed using the metrics that do apply.
No single ratio should be viewed in isolation. Use the Financial Metrics page and the GR2 table together with Financial Health, the full set of 9 Golden Rules, qualitative research, and your own investment objectives and risk tolerance.
Understanding the GR2 models
You can see which GR2 model has been assigned to a company by viewing the 9 Golden Rules page. The model is determined by Lincoln's research team based on the company's primary sector and business characteristics.
Each model has different targets because the financial characteristics of a strong industrial business differ from those of a resources company, a bank, a REIT, or an ETF. By tailoring targets to the model, Stock Doctor helps you compare companies on a more relevant and consistent basis.
For more background on the framework behind these targets, see the Golden Rule #2 – Financial Health and Health Ratios articles in the Help Centre.