Three numbers, one ratio. Build the bull / base / bear cases with explicit per-share targets, assign rough probabilities, and compute (a) expected value, and (b) the asymmetry — upside to bull divided by downside to bear. The asymmetry is what justifies position size.
EV = (p_bull × Bull) + (p_base × Base) + (p_bear × Bear)
Worked example — Pelham Holdings at $52. Bull $80 (35% — PFAS rule drives 25% volume growth in water segment), Base $58 (45% — sell-side 8% growth materializes), Bear $32 (20% — recession + delayed PFAS rule). EV = $60.50. Upside-to-bull is $28 (54%); downside-to-bear is $20 (38%). Reward / risk ≈ 1.4x. With a 35%-probability tail of 54% upside, this passes a typical 3% position-size hurdle.
Beware false precision. Three-decimal price targets and 37%-vs-38% probability splits imply more accuracy than any honest analyst has. Round probabilities to 5% increments, round targets to the nearest dollar (or 10 cents below $10), and treat the framework as a discipline — not a precision instrument.
Sit with the ideas.
Halton Industries trades at $30. Your bull case is $45 (40% probability), base case $35 (40%), bear case $20 (20%). What is the expected value of the position, and what does the upside-versus-downside asymmetry suggest?