Indicators
Valuation
Intrinsic value
Compare the market value of a stock to its intrinsic equity value.
term | description | formula |
---|---|---|
Price / Intrinsic Value | Compare a stock's market value to its Intrinsic (fair) value, calculated based on a set of methods. | Price ÷ Intrinsic Value |
Price / Intrinsic Value (DCF FCF) | Compare a stock's market value to its Intrinsic equity value based on discounted cash flow (unlevered DCF) analysis | Price ÷ Intrinsic value (DCF FCF) |
Price / Intrinsic value (DCF FCF) no growth | Compare a stock's market value to its Intrinsic equity value based on discounted cash flow (unlevered DCF) analysis, which uses no growth future free cash flow projections. | Price ÷ Intrinsic value (DCF FCF) no growth |
Price / Intrinsic value (DCF OE) | Compare a stock's market value to its Intrinsic equity value based on discounted Owner Earnings (levered DCF) analysis. | Price ÷ Intrinsic value (DCF OE) |
Price / Intrinsic value (OE) - regression | Compare a stock's market value to its Intrinsic equity value based on discounted Owner Earnings analysis using regression. | Price ÷ Intrinsic Value (DCF OE) - regression |
Price / Intrinsic value (Buffett) | Compare a stock's market value to its Intrinsic value calculated by taking present book value and dividends (Dividend Discount Model) | Price ÷ Intrinsic value (Buffett) |
Price / Intrinsic value (Residual Income) | Compare a stock's market value to its Intrinsic equity value using the residual income approach. | Price ÷ Intrinsic value (Residual Income) |
Price / Earnings Power Value | Compare a stock's market value to its Earnings Power Value. | Price ÷ Earnings Power Value |
Price / Intrinsic value (Lynch) | Compare a stock's market value to its Intrinsic Value, based on Peter Lynch's famous rule of thumb. | Price ÷ Intrinsic value (Lynch) |
Price / Adjusted Intrinsic value (Lynch) | Compare a stock's market value to its Adjusted Intrinsic Value, based on Peter Lynch's famous rule of thumb, but adjusted to low interest rates. | Price ÷ Adjusted Intrinsic value (Lynch) |
Price / Intrinsic value (Graham formula) | Compare a stock's market value to its Intrinsic value using the Graham formula. | Price ÷ Intrinsic value (Graham formula) |
Price / Intrinsic value (O'Malley formula) | Compare a stock's market value to its Intrinsic value using the O'Malley formula. | Price ÷ Intrinsic value (O'Malley formula) |
Price / Graham number | Compare a stock's market value to its Graham number. | Price ÷ Graham number |
Price / Intrinsic Value based on EBITDA | Compare a stock's market value to its Intrinsic Value estimate based on an EV/EBITA expectation. | Price ÷ Intrinsic value based on EBITDA |
Margin of Safety | the amount by which a company's shares are trading below their Intrinsic (fair) value. | 1 − Price ÷ Intrinsic Value |
Forward rate of return | The return that investors buying the stock today can expect from it in the future. (Donald Yacktman) | Normalised Free Cash Flow + EBITDA.6y CAGR + inflation |
Adjusted Forward rate of return | Forward Rate of Return adjusted with predictability of earnings growth. | Forward rate of return − abs(Forward rate of return × (1 − Predictability Score)) ÷ 2) |
Payback in years | Number of years before the investor gets back the paid money. |
x for which (Market cap − Common Book Value)
= sum of futureYear over x future years of
(slope × (futureYear − 1900) + intercept)
× (1 − Marginal tax rate)
|
Yield on price
Income or cash flow yield, based on price and market value of the Equity.
term | description | formula |
---|---|---|
Revenue yield on Price | The annual Revenue by the firm relative to the price. Inverse of Price per Revenue. | Revenue ÷ Price |
Gross Profit yield on Price | The annual Gross Profit by the firm relative to the price. | Gross Profit ÷ Price |
Operating Income After Interest yield | The Operating Income After Interest relative to the market value. | Operating Income After Interest ÷ Market cap |
EPS yield | The annual earnings relative to price paid for a share. Inverse of Price per EPS. | Earnings Per Share ÷ Price |
Dividend yield | How much a company pays out in dividends each year relative to its share price. | Traditional Gross Dividend ÷ Price |
Buyback ratio | The amount of cash paid by a company for buying back its common shares over the past year, divided by its market capitalization. | Common stock issued (repurchased) ÷ Market cap |
Net Payout yield | Shareholder return as cash paid out both as dividends and as stock buybacks. | Dividend yield + Buy back ratio |
Expected Return | One year expected return based on price target and dividend. | Price target.expected growth + Dividend yield |
Debt Paydown yield | The change in average of four quarters of long term debt over a company's market cap. | Net Borrowings ÷ Market cap |
Shareholder yield | Shows how much money the company is sending back to shareholders. | Net Payout yield + Debt Paydown yield |
Cash Flow from Operations yield on Price | The Cash Flow from Operation by the firm to equity relative to the stock price. Inverse of Price per Cash Flow from Operations. | Cash Flow from Operations ÷ Price |
Adjusted Earnings yield on Price | The Adjusted Earnings relative to the stock price. | Adjusted Earnings ÷ Price |
Adjusted Free Cash Flow yield on Price | The Adjusted Free Cash Flow relative to the stock price. | Adjusted Free Cash Flow ÷ Price |
Free Cash Flow yield on Price | The Free Cash Flow relative to the stock price. | Owner Earnings' ÷ Price |
Normalised Free Cash Flow yield on Price | The Normalised Free Cash Flow relative to the stock price. | Normalised Free Cash Flow ÷ Price |
Owner Earnings Yield | The Owner Earnings relative to the stock price. | Owner Earnings ÷ Price |
Predictive Owner Earnings Yield | The predictive Free Cash Flow to the Owner relative to the stock price. | Predictive Owner Earnings ÷ Price |
Long-term Reinvestments to Market cap | Measures the relationship between a company's market capitalization and its reinvestments. | −Long-term Reinvestments ÷ Market cap |
Short-term Reinvestments to Market cap | Shows the change in working capital relative to the Market cap. | −Change in Working Capital ÷ Market cap |
Payback ratio | Ratio of Motilal Oswal, measuring in what degree 5 years of future estimated income will pay back current market value. | Price ÷ Income After Tax.5y est |
Price / Sales | Compare a stock's market value to its revenue. The Price to Revenue ratio can vary substantially across industries; therefore, it's useful mainly when comparing similar companies. | Market cap ÷ Revenue |
Price / Gross profit | Compares a stock's market value to its gross profit. Inverse of Net income yield. | Market cap ÷ Gross profit |
Price / Research | Measures the relationship between a company's market capitalization and its research and development (R&D) expenditures. | Market cap ÷ Research & Development |
Price / EPS | A valuation ratio of a company's current share price compared to its per-share earnings. | Price ÷ Earnings |
Price / Cash Flow from Operations | Compares a company's market price to its level of operating cash flow. This is similar to the valuation measure of price-to-free cash flow but uses a looser measure of cash flow, by not deducting capital expenditures. | Market cap ÷ Cash Flow from Operations |
Price / Free Cash Flow | Compares the stock price to its Free cash flow to Equity | Price ÷ Owner Earnings' |
McLean index | One of McLean's tricks as a quick guide to a share's attractiveness. Less than one is good value. | Price / Sales ÷ Operating Margin |
EVRG | The relative trade-off between the enterprise value of a company, the revenue and the company's expected growth. | (Enterprise Value / Revenue) ÷ Revenue.rCAGR 67% |
PEG | The relative trade-off between the price of a stock, the net profit and the company's expected growth. | (Price / EPS) ÷ Net income.rCAGR 67% |
PEGY | The price/earnings-to-growth and dividend yield ratio demonstrates how much the market is willing to pay for earnings growth and dividend yield. By incorporating dividend yield, the PEGY ratio accounts for a companies' inclination (or disinclination) to pay out dividends. | (Price / EPS) ÷ (Net income.rCAGR 67% + Dividend yield) |
PFCFG | The relative trade-off between the price of a stock, the Free Cash Flow and the company's expected growth. | (Price / Free Cash Flow) ÷ Owner Earnings'.rCAGR 67% |
ROE / PE | How many units of growth one buys for a unit of P/E. | Return on Equity ÷ Price / EPS |
Liquidity ratio | Profits to yearly trading value. The more earnings per dollar volume, the higher the probability of finding overlooked value. | Net income ÷ Dollar volume |
Yield on Enterprise Value
Income or cash flow yield, based on the Enterprise Value.
term | description | formula |
---|---|---|
Revenue yield on Enterprise Value | The Revenue by the firm relative to the Enterprise Value. Inverse of EV per Revenue. | Revenue ÷ Enterprise Value |
Gross Profit yield on Enterprise Value | Quite similar to Revenue / Enterprise Value, with the likely benefit of excluding low-gross-margin businesses from consideration. | Gross Profit ÷ Enterprise Value |
EBITDA yield | The annual EBITDA by the firm relative to the Enterprise Value. Inverse of EV per EBITDA. | EBITDA ÷ Enterprise Value |
EBITA yield | The annual EBITA by the firm relative to the Enterprise Value. Inverse of EV per EBITA. | EBITA ÷ Enterprise Value |
Adjusted Operating Income yield | The adjusted Operating Income earned by the firm relative to the Enterprise Value. Inverse of EV / Adjusted Operating Income. | Adjusted Operating Income ÷ Enterprise Value |
Operating Income yield | The annual Operating Income earned by the firm relative to the Enterprise Value. Inverse of EV / Operating Income. | Operating Income ÷ Enterprise Value |
EBIT yield | Factor of Joel Greenblatt’s Magic Formula. The annual EBIT earned by the firm relative to the Enterprise Value. Inverse of EV / EBIT. | EBIT ÷ Enterprise Value |
NOPAT Yield | The Net Operating Profit After Tax relative to the Enterprise Value. | Net Operating Profit After Tax (NOPAT) ÷ Enterprise Value |
Net income yield on Enterprise Value | The Net income From Continuing Operations by the firm relative to the Enterprise Value. Inverse of Enterprise Value / Net income. | Net income From Continuing Operations ÷ Enterprise Value |
Cash Flow from Operations yield on EV | The Cash Flow from Operations to Equity relative to the Enterprise Value. Inverse of EV per Cash Flow from Operations. | Cash Flow from Operations ÷ Enterprise Value |
Cash Flow After Taxes yield | The annual Cash Flow After Taxes by the firm to equity, relative to the Enterprise Value. Facilitates comparing firms from different industries and with different capital structures. | Cash Flow After Taxes ÷ Enterprise Value |
Cash-NOPAT Yield | The Cash Net Operating Profit After Tax relative to the Enterprise Value. | Cash-NOPAT ÷ Enterprise Value |
Free Cash Flow yield on Enterprise Value | The Free Cash Flow to the firm relative to the Enterprise Value. Inverse of EV per Free Cash Flow. | Free Cash Flow to the Firm ÷ Enterprise Value |
Enterprise Value / Revenue | A valuation measure that compares the Enterprise Value of a company to the company's sales. EV/sales gives investors an idea of how much it costs to buy the company's sales. | Enterprise Value ÷ Revenue |
Enterprise Value / Gross profit | Quite similar to Enterprise Value to revenue, with the likely benefit of excluding low-gross-margin businesses from consideration. It may identify a few opportunities missed by EV/EBIT or EV/EBITDA (Acquirer's multiple), if you are willing to accept more volatility as a trade-off. | Enterprise Value ÷ Gross profit |
Enterprise Value / Research | Measures the relationship between a company's Enterprise Value and its research and development (R&D) expenditures. | Enterprise Value ÷ Research & Development |
Enterprise Value / EBITDA | A variant of the Acquirer's Multiple that compares the value of a business, free of Debt, to its EBITDA, with the advantage of valuing a company regardless of its capital structure. | Enterprise Value ÷ EBITDA |
Allen Enterprise Value / EBITDA | Compares the value of a business, free of Debt, to its EBITDA, with the advantage of valuing a company regardless of its capital structure. The Enterprise Value/ EBITDA according to Dana Allen is a number, even when its components are negative. |
|
Enterprise Value / Adjusted Operating Income | a.k.a. The Acquirer's Multiple of Tobias Carlisle: it is the valuation ratio used to find attractive takeover candidates. Compares the value of a business, free of Debt, to its operating income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. Compares the value of a business, free of debt, to its Adjusted Operating Income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. | Enterprise Value ÷ Adjusted Operating Income |
Enterprise Value / Operating Income | The valuation ratio used to find attractive takeover candidates. Compares the value of a business, free of Debt, to its operating income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. Compares the value of a business, free of debt, to its Operating Income, with the advantage of valuing a company regardless of its capital structure. Inverse of Operating Income yield. | Enterprise Value ÷ Operating Income |
Enterprise Value / EBIT | Compares the value of a business, free of debt, to its EBIT, with the advantage of valuing a company regardless of its capital structure. Inverse of EBIT yield. | Enterprise Value ÷ EBIT |
Enterprise Value / Net income | Compares the value of a business, free of Debt, to its Net income From Continuing Operations, with the advantage of valuing a company regardless of its capital structure. Inverse of Earnings yield on Enterprise Value. | Enterprise Value ÷ Net income From Continuing Operations |
Enterprise Value / Cash Flow After Taxes | Compares the value of a business, free of debt, to its Cash Flow After Taxes. Facilitates comparing firms from different industries and with different capital structures. | Enterprise Value ÷ Cash Flow After Taxes |
Enterprise Value / Free Cash Flow | Compares the value of a business to its Free cash flow to the firm, with the advantage of valuing a company regardless of its capital structure. | Enterprise Value ÷ Free Cash Flow to the Firm |
EVEBITDAG | The relative trade-off between the price of a stock, the EBITDA and the company's expected growth. | (Enterprise Value / EBITDA) ÷ EBITDA.rCAGR |
EVEBITG | The relative trade-off between the price of a stock, the EBIT and the company's expected growth. | (Enterprise Value / EBIT) ÷ EBIT.rCAGR |
Valuation - Balance
Compare market value to balance.
term | description | formula |
---|---|---|
Price to Proportional Tangible Book Value | Compares a stock's market value to its Proportional Tangible Book Value. | Market cap ÷ Proportional Tangible Book Value |
Price to Common Tangible Book Value | Compares a stock's market value to its Common Tangible Book Value. | Price ÷ Common Tangible Book Value |
Price to Book Value | Also Price to Common Shareholders' Equity. Compares a stock's market value to its Common Shareholders' Equity. | Price ÷ Common Book Value.per share |
Price to Non-cash assets | Market cap to Non-cash assets. | Market cap ÷ Non-cash assets |
Price to Fixed assets | Market cap to net Fixed Assets. | Market cap ÷ Net Property, Plant and Equipment |
Price to NCAV | Compares a stock's market value Benjamin Graham's Net current asset value. | Market cap ÷ NCAV |
Price to Liabilities | Market Value of Equity / Book Value of Total Liabilities. | Market cap ÷ Total liabilities |
Price to NNWC | Compares a stock's market value to its Net-Net Working Capital. | Market cap ÷ NNWC |
Faustmann ratio | Compares market value to Net Worth. | Market cap ÷ Net Worth |
Price to Net cash | Calculated by dividing the Market Capitalisation by Total Cash minus Total Liabilities. | Market cap ÷ Net cash |
Enterprise Value to Assets | Valuation metric used for measuring the value of the company as compared to its tangible assets and is very helpful in comparing valuations of companies across similar stocks in the sector. | (Enterprise Value + Excess Cash'') ÷ Total Assets |
Enterprise Value to Tangible Assets | Valuation metric used for measuring the value of the company as compared to its tangible assets and is very helpful in comparing valuations of companies across similar stocks in the sector. | (Enterprise Value + Excess Cash'') ÷ Tangible Assets |
Enterprise value to Capital Employed | A measure of enterprise value normalized by the level of capital used by the business. | Enterprise Value ÷ Capital Employed |
Book to Market | Gives the value of a company by comparing the book value of a firm to its market value. | Common Book Value ÷ Market cap |
Net Cash to Market | Calculated by dividing the Total Cash minus Total Liabilities by Market Capitalisation. | Net cash ÷ Market cap |
Net Cash change to Market cap | Shows the impact of the company building up their net cash storage. | Net cash.diff ÷ Market cap |
Net Debt to Market | Gives a sense of how much debt a company has relative to its market value. | Net Debt ÷ Market cap |
Net Debt change to Market cap | Shows the impact of the company building up their cash storage, or paying down debt. | Net Debt.diff ÷ Market cap |
Equity financing ratio | Percentage of financing that is equity. | Market cap ÷ Financing |
Debt financing ratio | Percentage of financing that is debt. | Debt ÷ Financing |
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 |
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 |
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 free cash flow per dollar the business generates from invested capital. | Free Cash Flow to the Firm ÷ 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 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 income From Continuing Operations (IAT) ÷ 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. | Free Cash Flow to the Firm' ÷ Capital employed (Greenblatt).yr avg |
EBITA Return on Assets (EBITA ROA) | Measures operating efficiency apart from tax and leveraging factors. | EBITA ÷ Total 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 Assets (EBIT ROA) | Measures operating efficiency apart from tax and leveraging factors. | EBIT ÷ Total Assets.yr avg |
EBIT return on Tangible Assets (EBIT ROTA) | Measures operating efficiency apart from tax and leveraging factors. | EBIT ÷ Tangible 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. | Net income ÷ 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 |
Free Cash Return on Assets (Free Cash ROA) | Measures how efficiently total assets are being used to produce cash for equity and debt stakeholders. | Free Cash Flow to the Firm ÷ Total Assets.yr avg |
Cash-NOPAT on Tangible Assets | Measures how efficiently tangible assets are being used to produce cash for equity and debt stakeholders. | Free Cash Flow to the Firm ÷ 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 |
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 |
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 ÷ Shareholders' equity.yr avg |
Free Cash Return on Equity (Free Cash ROE) | 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 |
OE 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 / Assets | Measure of Research & Development intensity. | Research & Development ÷ Total Assets.yr avg |
R&D / Book | Measure of Research & Development intensity. | Research & Development ÷ Shareholders' Equity.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 |
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) |
Reinvestment rate' | Measures the percentage of a company's after-tax operating income that is allocated to capital expenditures and net working capital. | −(Change in Working Capital + Net Capital Expenditures) ÷ Cash-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 |
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 |
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 |
Free Cash Flow margin | Measures how much per dollar of revenue management is able to convert into Free Cash Flow. | Owner Earnings' ÷ Revenue |
Adjusted FCF 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/ 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) |
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 |
Quality of earnings
Refers to the amount of earnings attributable to higher sales or lower costs rather than artificial profits created by accounting anomalies such as inflation or inventory.
term | description | formula |
---|---|---|
Cash Sales | Sales in which the payment obligation of the buyer is settled at once. | Revenue − Accounts receivables.1y diff |
Cash revenue adjustment | Delivered goods or services that are not paid at the moment minus undelivered goods or services that are paid up front.. | Accounts Receivables − Deferred revenue |
CF / EPS | Compares Owner Earnings with reported EPS. | Owner Earnings ÷ EPS |
CFO / Net income | Ratio to determine the quality of a firm's reported earnings. When the ratio rises above 1, it is indicative of a strong ability to fund its activities through generation of operating cash flow. | Cash Flow from Operations ÷ Net income |
Accruals to Total Assets | Capture where accounting profits are not supported by cash profits. | (Net income From Continuing Operations − Cash Flow from Operations ÷ Total Assets.yr avg |
Sloan ratio | Richard Sloan was first to document what is referred to as the accrual anomaly. Shares of companies with small or negative accruals vastly outperform (+10%) those of companies with large ones. | Cash Flow based Aggregate Accruals ÷ Total Assets.yr avg |
Absolute Sloan ratio | Absolute value of sloan ratio. | abs(Sloan ratio) |
RSST Accruals to Total Assets | Capture where accounting profits are not supported by cash profits, using RSST accruals. | RSST Acruals ÷ Total Assets.yr avg |
Soft Assets to Total Assets | The proportion of a company's assets that are made up for soft assets. | Soft assets ÷ Total Assets |
Liquidity
Indicators expressing the ability of a company to pay short-term obligations.
term | description | formula |
Current ratio | Liquidity ratio. Measures whether or not a firm has enough resources to pay its debts over the next 12 months | Current Assets ÷ Current liabilities |
Current Liability Coverage Ratio | Liquidity ratio. Measures the company's ability to pay its current liabilities. It's a better indicator than the current ratio or quick ratio. | (Cash Flow from Operations − Dividend Paid) ÷ Current liabilities |
Cash ratio | A company's ability to repay its short-term debt with cash or near-cash resources. | Cash and short-term investments ÷ Current Liabilities |
Free Cash Current Liability Coverage Ratio | Liquidity ratio. Measures the company's ability to pay its current liabilities. Before dividends paid. | Owner Earnings' ÷ Current liabilities |
Free Cash Current Liability Net Coverage Ratio | Liquidity ratio. Measures the company's ability to pay its current liabilities. After dividends paid. | (Owner Earnings' − Dividend Paid) ÷ Current liabilities |
Quick ratio | Liquidity ratio. measures a company’s ability to meet its short-term obligations with its most liquid assets. | (Total cash and equivalents + Total receivables) ÷ Current liabilities |
Complete Quick ratio | Liquidity ratio. measures a company’s ability to meet its short-term obligations with its most liquid assets and cash flow. Before dividends paid. | (Cash and short-term investments + Owner Earnings') ÷ Current liabilities |
Net Complete Quick ratio | Liquidity ratio. measures a company’s ability to meet its short-term obligations with its most liquid assets and cash flow. After dividends paid. | (Cash and short-term investments + Owner Earnings' − Dividend Paid) ÷ Current liabilities |
Cash to Current Assets | Determines how liquid a company is by comparing its readily available cash to its current assets. | Cash and short-term investments ÷ Current Assets |
Cash to Assets | The proportion of a company's assets that are made up for cash and short term investments. | Cash and short-term investments ÷ Total Assets |
Net Working Capital to Assets | Liquidity ratio that expresses the net current assets or working capital of a company as a percentage of its total assets. One of the most keenly watched financial ratios. | Net Working Capital ÷ Total Assets |
Days Sales Outstanding | Or Days' Sales in Receivables, is the average number of days it takes to collect a receivable. High growth can be an indicator of revenue inflation. | Accounts receivable.yr avg ÷ Revenue.daily |
Days Payable Outstanding | A company's average payable period, telling how long it takes a company to pay its invoices from trade creditors. | Accounts Payable.yr avg ÷ Cost of Revenue.daily |
Flow ratio | Measures whether the company has an asset light business model and manages its working capital well by isolating the bad current assets. | Non-cash current assets ÷ Non-Interest-Bearing Current Liabilities (NIBCL) |
Adjusted Interest Coverage Ratio | Liquidity ratio. The lower the ratio, the more the company is burdened by debt expense. | Adjusted Free Cash Flow to the Firm ÷ Interest expense |
Interest Coverage ratio | Liquidity ratio. The lower the ratio, the more the company is burdened by debt expense. | EBIT ÷ Interest expense |
Months Before Cash Runs Out | How much months are left before the company runs out of cash. | Cash and short-term investments ÷ Burn rate |
Loans-to-Assets | Measures the total loans outstanding as a percentage of total assets. The higher this ratio indicates a bank is loaned up and its liquidity is low. The higher the ratio, the more risky a bank may be to higher defaults. | Net loans ÷ Total Assets |
Loan-deposit ratio | Ratio between the banks total loans and total deposits. If the ratio is lower than one, the bank relied on its own deposits to make loans to its customers, without any outside borrowing. If the ratio is greater than one, the bank borrowed money which it reloaned at higher rates, rather than relying entirely on its own deposits. | Net loans ÷ Deposits |
Solvency
Indicators expressing the ability of a company to meet its long-term financial obligations.
term | description | formula |
---|---|---|
Debt ratio | Solvency Ratio. The percentage of a company's assets that are provided via debt | Total liabilities ÷ Total Assets |
Long term debt ratio | The Long term debt to Total asset ratio is an indication of what portion of a company's total assets is financed from long term debt. The value varies from industry and company. | Long-term liabilities ÷ Total Assets |
Total Debt/ Assets | A measure of the extent to which a company's assets are financed by debt. | Total Debt ÷ Total Assets |
Net Debt/ Assets | A measure of the extent to which a company's assets are financed by debt. | Net Debt ÷ Total Assets |
Total debt / Equity | Solvency Ratio. A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. | Total debt ÷ Shareholders' Equity |
Liabilities / Equity | Solvency Ratio. A measure of a company's financial leverage calculated by dividing its total debt by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. | Total liabilities ÷ Shareholders' Equity |
Long-term Debt/ Equity ratio | Solvency Ratio. Calculated by taking the company's long-term debt and dividing it by the book value. The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky. | Long-term debt and Capital lease obligations ÷ Shareholders' Equity |
Net Debt / Equity | Solvency Ratio. A measure of a company's financial leverage calculated by dividing its net debt by stockholders' equity. It indicates what proportion of equity and net debt the company is using to finance its assets. | Net Debt ÷ Shareholders' Equity |
Equity ratio | Solvency Ratio. A financial ratio indicating the relative proportion of equity used to finance a company's assets. | Shareholders' Equity ÷ Total Assets |
Equity multiplier | Solvency Ratio. A measure of financial leverage. | Total Assets ÷ Shareholders' Equity |
Debt / Tangible Book value | Solvency Ratio. A measure of a company's financial leverage calculated by dividing its total liabilities by tangible book value. | Adjusted Total Liabilities ÷ Tangible Book value |
Tier 1 Capital ratio | The part of a financial institution's capital that comprises equity and disclosed reserves. | Core Capital ÷ 0.8 × Non-cash assets |
LT debt / Working capital | Helpful in determining the degree of reliance by a firm on long-term debt to finance its day-to-day operations. | Long-term debt and Capital lease obligations ÷ Net Working Capital |
Net debt / EBITDA | indicates how many years of EBITDA would be necessary in order to pay back all the debt | Net debt ÷ EBITDA |
Cash to Debt | Measures the financial strength of a company. | Cash and short term investments ÷ Total debt |
Cash Flow Coverage Ratio | A type of debt coverage ratio, and is an estimate of the amount of time it would take a company to repay all its liabilities if it devoted all of its cash flow to debt repayment. | Cash Flow from Operations ÷ Total liabilities |
Free Cash Flow / Long Term Debt | This ratio provides an indication of a company's ability to cover long term debt with its yearly free cash flow. The higher the percentage ratio, the better the company's ability to carry its debt. | Free Cash Flow to the Firm ÷ Long-term debt and Capital lease obligations |
Debt leverage ratio | measures a company's ability to repay debt obligations from annualized EBITDA. | Total liabilities.yr avg ÷ EBITDA |
Interest expense to Debt ratio | Estimates the rate of interest a company is paying on their outstanding debt. | Interest expense ÷ Total debt |
External Financing Ratio | Shows if a company is able to finance investments from cash the business generated or if it needed external money to meet its investment needs. | (Total assets.diff − Cash Flow from Operations) ÷ Total assets |