Profitability
Based on Investment
Indicators expressing profitability and efficiency of the company, based on investment.
| term | description | formula |
|---|---|---|
| Asset Turnover | Asset turnover measures a firm's efficiency at using its assets in generating revenue. There is no number that determines whether a company is doing a good job of generating revenue from its assets. This makes it important to compare the ratio to the historical levels along with peer company or industry averages. | Revenue ÷ Total Assets.yr avg |
| Fixed Assets Turnover | Measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. There is no number that determines whether a company is doing a good job of generating revenue from its fixed assets. This makes it important to compare the ratio to the historical levels along with peer company or industry averages. | Revenue ÷ Net Property, Plant and Equipment.yr avg |
| Inventory Turnover | Measures how fast a company is selling inventory and is generally compared against industry averages. | Revenue ÷ Inventory.yr avg |
| Cash Turnover Ratio | Shows the number of times cash is turned over in an accounting period. | Revenue ÷ Total cash and equivalents.yr avg |
| Gross Profitability Ratio | Evidence that a company has sustainable competitive advantages. It is gaining credibility in value investing circles because it provides valuable and predictive qualitative analysis when combined with valuation metrics. | Gross Profit ÷ Total Assets.yr avg |
| EBITA Return on Assets (EBITA ROA) | Measures operating efficiency apart from tax and leveraging factors. | EBITA ÷ Total Assets.yr avg |
| EBIT Return on Assets (EBIT ROA) | Measures operating efficiency apart from tax and leveraging factors. | EBIT ÷ Total Assets.yr avg |
| Return on Assets (ROA) | An indicator of how profitable a company is relative to its total assets. It's a useful number for comparing competing companies in the same industry. | NOPAT ÷ Total Assets.yr avg |
| Cash Return on Assets (Cash ROA) | Measures how efficiently total assets are being used to produce cash for equity stakeholders. | Cash Flow from Operations ÷ Total Assets.yr avg |
| Cash-NOPAT Return On Assets (Cash-NOPAT ROA) | Measures how efficiently total assets are being used to produce cash for equity and debt stakeholders. | Cash-NOPAT ÷ Total Assets.yr avg |
| Tangible Gross Profitability Ratio | Evidence that a company has sustainable competitive advantages. It is gaining credibility in value investing circles because it provides valuable and predictive qualitative analysis when combined with valuation metrics. | Gross Profit ÷ Tangible Assets.yr avg |
| EBITA return on Tangible Assets (EBITA ROTA) | Measures operating efficiency apart from tax and leveraging factors. | EBITA ÷ Tangible Assets.yr avg |
| EBIT return on Tangible Assets (EBIT ROTA) | Measures operating efficiency apart from tax and leveraging factors. | EBIT ÷ Tangible Assets.yr avg |
| Cash-NOPAT Return On Tangible Assets | Measures how efficiently tangible assets are being used to produce cash for equity and debt stakeholders. | Cash-NOPAT ÷ Tangible Assets.yr avg |
| Owner Return on Tangible Assets | Measures how efficiently Tangible Assets are being used to produce Owner Earnings. | Owner Earnings'' ÷ Tangible Assets.yr avg |
| Cash Return on Gross Investment | A company's financial performance indicator that measures the gross operating cash flow a company produces with its gross investment. Facilitates comparing firms from different industries and with different capital structures. | EBITDA ÷ Gross Investment.yr avg |
| Return on Invested Capital (ROIC) | Measures how efficiently the assets of a company have been used to generate income. | NOPAT ÷ Invested Capital.yr avg |
| Economic spread | The net return the firm achieves for the capital it uses in its operations. | Return on Invested Capital (ROIC) − WACC |
| Adjusted Return on Invested Capital (ROIC) | Measures how much Adjusted Earnings per dollar the business generates from invested capital. | Adjusted Earnings ÷ Invested Capital.yr avg |
| Cash Return on Invested Capital (CROIC) | Measures how much available cash flow per dollar the business generates from invested capital. | Cash-NOPAT ÷ Invested Capital.yr avg |
| Owner Return on Invested Capital (OROIC) | Measures how much owner earnings per dollar the business generates from invested capital. | Owner Earnings ÷ Invested Capital.yr avg |
| Adjusted Return on Capital Employed (Adjusted ROCE) | Compares adjusted operating income with capital employed, using capital employed as defined by Greenblatt. | Adjusted Operating Income ÷ Capital employed (Greenblatt).yr avg |
| Return on Capital Employed (ROCE) | Compares earnings with capital employed, using Capital employed as defined by Greenblatt. | EBIT ÷ Capital employed (Greenblatt).yr avg |
| Adjusted After Tax Return on Capital Employed (Adjusted AT ROCE) | Measures how efficiently Capital Employed is being used to produce Adjusted Earnings for equity stakeholders. | Adjusted Free Cash Flow ÷ (Capital Employed (Greenblatt).yr avg − Long-term lease.yr avg) |
| After Tax Return on Capital Employed (AT ROCE) | Compares earnings with capital invested in the company. | Net Operating Profit After Tax (NOPAT) ÷ Capital Employed.yr avg |
| Cash Return on Capital Employed (CROCE) | Compares Free Cash Flow to the Firm with capital invested in the company. | Free Cash Flow to the Firm ÷ Capital Employed.yr avg |
| Cash Return on Capital Employed' (CROCE') | Compares Free Cash Flow to the Firm with capital invested in the company. | Firm Earnings ÷ Capital employed (Greenblatt).yr avg |
| Return on Net Operating Assets | A rate of return representing the efficiency of a company’s net operating assets in generating income. | Adjusted Operating Income ÷ Net Operating Assets'.yr avg |
| R&D / Assets | Measure of Research & Development intensity. | Research & Development ÷ Total Assets.yr avg |
| CapEx / Assets | Measures Capital Expenditure Intensity as the relationship between a company's total assets and its Capital Expenditures. | −Capital Expenditures ÷ Total Assets.yr avg |
| CapEx / Fixed Assets | Measures Capital Expenditure Intensity as the relationship between a company's Fixed Assets and its Capital Expenditures. | −Capital Expenditures ÷ Gross Property, Plant and Equipment.yr avg |
| Depreciation rate | Percent rate at which fixed assets are depreciated. | Depreciation / Gross Fixed Assets |
| CapEx / Depreciation | Helps understand a business's current level of capital spending and predict the firm's future direction. | −Capital Expenditures ÷ Depreciation.yr avg |
| Long-term Reinvestment rate | Allows to understand how much money a company is reinvesting in itself. | −(Change in Working Capital + Long-term Reinvestments) ÷ −Adjusted Net Operating Profit After Tax (NOPAT) |
| Long-term Reinvestments / Assets | Measures long-term reinvestment intensity the relationship between a company's total assets and its reinvestments. | −Long-term Reinvestments ÷ Total Assets.yr avg |
| Revenue per Employee | Measure of how much money each employee generates for the firm. | Revenue ÷ Number of employees |
| Profit per Employee | Measure of how much money each employee generates for the firm. Good proxy for the return on intangibles. | Net income From Continuing Operations ÷ Number of employees |
| Retained Earnings / Total Assets | Measures cumulative profitability over time as a proportion of total assets, reflecting the company's age and earning power. | Retained Earnings ÷ Total Assets.yr avg |
| Return on Research Capital | Used to assess the revenue earned by a company as an outcome of expenditures made on research and development activities. | Gross Profit ÷ Research & Development |
| Long-term Reinvestments return | Measures the effectiveness of reinvestments by comparing income increase with the reinvestments. | Cash Flow from Operations.wavg diff ÷ −Long-term Reinvestments.wavg |
| Earnings Power Value/ Assets | Indicator of management quality and competitive advantage. Asset value exceeding EPV, indicates value lost to poor management and/or industry decline. EPV similar to EPV, indicates free entry business balance. EPV exceeding asset value is the consequence of competitive advantage and/or superior management. | Earnings Power Value ÷ Total Assets |
| Inventory/ Assets | Measures the inventory as a percentage of total assets. Used to assess operational management and inventory turnover. | Inventory ÷ Total Assets |
| Accounts Receivable/ Assets | Measures the accounts receivable as a percentage of total assets. | Accounts receivable ÷ Total Assets |
| Cash Return on Equity (Cash ROE) | Measures a corporation's profitability by revealing how much cash flow from operations a company generates with the money shareholders have invested. | Cash Flow from Operations ÷ Equity.yr avg |
| Return on Equity (ROE) | Measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. | Earnings Per Share (EPS) ÷ Common Book Value.yr avg |
| Adjusted Return on Equity (ROE) | Return on Equity adjusted for treasury stock. | Net income ÷ Shareholders' Equity and Treasury Stock.yr avg |
| Return on Tangible Equity (ROTE) | Measures the rate of return on the tangible common equity. | Earnings Per Share (EPS) ÷ Common Tangible Book Value.yr avg |
| Owner Return on Equity | Measures a corporation's profitability by revealing how much free cash flow a company generates with the money shareholders have invested. | Owner Earnings ÷ Shareholders' equity.yr avg |
| Owner' Return on Equity | Measures a corporation's profitability by revealing how much free cash flow a company generates with the money shareholders have invested. | Owner Earnings' ÷ Shareholders' equity.yr avg |
| Return on Retained Earnings (RORE) | How much a company earns for its shareholders by reinvesting its profits back into the company. | EPS.5y change ÷ Change to Retained Earnings.sum 5y |
| R&D / Book | Measure of Research & Development intensity. | Research & Development ÷ Shareholders' Equity.yr avg |
Based on Sales
Indicators expressing profitability and efficiency of the company, based on sales.
| term | description | formula |
|---|---|---|
| Gross margin | Gross margin represents the proportion of each dollar of revenue that the company retains as gross profit. Its growth is the best quantitative indicator of a company’s pricing power. | Gross Profit ÷ Revenue |
| EBITDA margin | A financial metric used to assess a company's profitability by comparing its revenue with earnings. More specifically, since EBITDA is derived from revenue, this metric would indicate the percentage of a company is remaining after operating expenses. | EBITDA ÷ Revenue |
| EBITA margin | A financial metric used to assess a company's profitability by comparing its revenue with earnings. More specifically, since EBITA is derived from revenue, this metric would indicate the percentage of a company is remaining after operating expenses. | EBITA ÷ Revenue |
| Operating Margin | A financial metric used to assess a company's profitability by comparing its revenue with Operating Income. Particularly with regard to cost control. | Operating Income ÷ Revenue |
| Adjusted Operating Margin | A financial metric used to assess a company's profitability by comparing its revenue with adjusted Operating Income. Particularly with regard to cost control. | Adjusted Operating Income ÷ Revenue |
| EBIT margin | A.k.a. Operating profit margin. A financial metric used to assess a company's profitability by comparing its revenue with EBIT. Particularly with regard to cost control. | EBIT ÷ Revenue |
| Operating Cash Flow margin | Measures cash from operating activities as a percentage of sales revenue in a given period. | Cash Flow from Operations ÷ Revenue |
| Owner Earnings margin | Measures how much per dollar of revenue management is able to convert into Owner Earnings. | Owner Earnings' ÷ Revenue |
| Free Cash Flow margin | Represents the proportion of each dollar of revenue that the company retains as Free Cash Flow. | Free Cash Flow ÷ Revenue |
| Adjusted Earnings margin | Measures how much per dollar of revenue management is able to convert into Adjusted Earnings. | Adjusted Earnings ÷ Revenue |
| Net margin | Or Net profit margin is a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue. | Net income ÷ Revenue |
| Net interest margin | Performance metric that examines how successful a firm's investment decisions are compared to its debt situations. | Net Interest Income ÷ Interest earning assets |
| EVA margin | The firm's true economic profit margin net of all operating and capital costs. | EVA ÷ Revenue |
| EVA momentum | The change in a company's economic profit in one period divided by its sales in the prior period. | EVA diff ÷ Revenue |
| Loss ratio | Also Claims ratio. calculated by dividing total claims expense by net earned premiums. | Policyholder benefits and claims incurred ÷ Premiums |
| Combined ratio | Profitability ratio. Measures whether the insurance company is earning more revenues from its collected premiums relative to the claims it pays out. | Total benefits, claims and expenses ÷ Premiums |
| R&D to Revenue | Measures the percentage of sales that is allocated to R&D expenditures. | Research & Development ÷ Revenue |
| Cost-to-Income Ratio | The measure of the costs of running a company in relation to its operating income. It is an important financial tool, particularly when evaluating banks. | Operating Expenses (OpEx) ÷ Operating Income |
| Operating Expense Ratio (OER) | Shows the efficiency of a company's management by comparing the total operating expense (OpEx) of a company to revenue. | Operating Expenses (OpEx) ÷ Revenue |
| Selling General & Administrative expenses/ Revenue | Expense ratio by dividing the selling, general & administrative expenses by revenue. | Selling General & Administrative expenses ÷ Revenue |
| Selling General & Administrative expenses/ Gross Profit | Expense ratio by dividing the selling, general & administrative expenses by gross profit. | Selling General & Administrative expenses ÷ Gross Profit |
| Depreciation/ Gross Profit | Expense ratio by dividing depreciation by gross profit. | Depreciation ÷ Gross Profit |
| Capital Expenditures/ Revenue | Measures how much of a company’s revenue is being devoted to capital expenditure. | Net Capital Expenditures ÷ Revenue |
| Capital Expenditures/ Operating Income | Measures how much of a company’s operating income is being devoted to capital expenditure. | Net Capital Expenditures ÷ (Gross Profit − Selling General & Administrative expenses) |
| Capital Expenditures/ Cash Flow from Operations | Measures how much of a company’s Cash Flow from Operations is being devoted to capital expenditure. | Net Capital Expenditures ÷ Cash Flow from Operations |
| Days Inventory Outstanding | Or Days Sales of Inventory value (DSI), is a financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory into sales. | Inventory.yr avg ÷ Cost of Revenue.daily |
| Cash Conversion Cycle | A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. | Days Inventory Outstanding + Days Sales Outstanding − Days Payable Outstanding |
| The Rule of 40 | A rule of thumb to analyze the health of a software/SaaS business. It takes into consideration two of the most important metrics for a subscription company: growth and profit. | Revenue.qtr: 1y growth + EBITDA margin |