@TrolKabu, I think you're thinking more the old autoloot system, made by Hardcode (I think?). That thing weighed heavily on raw dmg, armor and cost, so you see weirdly skewed results. Though it's still better than vanilla's rummage sale loot system.
@Windy, I did read your posts and design docs both here and on the wiki. But from my *personal experience*, stuff like vsShields is too heavily weighted, giving preference to a crap axe over a good sword, and stuff like Speed and Maneuverability on horses is underweighted, thus everyone choosing a 42 Speed Charger over a 50 Speed Courser even when told to choose Speed. These two are fine, just minor algorithmic issues.
The armor issue I can't explain though. I have cases of them choosing stuff with lower armor, lower cost, same Str req and same weight, using all Light/Medium/No Limit settings. Not every time, but often enough to be noticeable. I don't think this is a matter of taste. I'll start keeping savegames with empirical evidence and will upload them if you're interested.
Interestingly, I think Windy is the only person to code a new autoloot system since Band of Warriors, and that was, what, for M&B .903?
Edit: Maybe the answer is as simple as modifiers not being considered by the autoloot. Same item, Chipped vs Masterwork? Your companion found nothing to interest them.