Deleveraging Book/Market Ratio
factor.formula
The calculation formula for net operating assets is:
Net operating assets represent the total value of assets used by a company for actual operating activities. It is calculated by adding shareholders' equity to net liabilities, which is the balance after deducting financial assets from financial liabilities. This indicator attempts to separate the assets generated by a company's operations from its financing activities, and focuses more on the company's core operating capabilities.
More detailed operating net assets calculation formula:
The calculation process of operating net assets is explained in detail here: - **Total shareholders' equity (including minority shareholders' equity):** refers to the sum of the equity attributable to the parent company and the minority shareholders' equity, representing the owner's ownership of the company's net assets. - **Financial liabilities:** refers to the debts incurred by the company due to financing activities, such as short-term loans, long-term loans, bonds payable, etc. - **Financial assets:** refers to financial instruments held by the company, such as trading financial assets, available-for-sale financial assets, etc. Deducting this part of assets from total assets can better reflect the assets actually operated by the company.
The calculation formula for the market value of net operating assets is:
The market value of net operating assets is a concept of market value that adjusts the traditional market value to one that takes into account operating assets and liabilities. It is calculated as follows: - **Market value:** refers to the total market value of a company's stock, usually obtained by multiplying the stock price by the number of shares issued. - **Financial liabilities:** refers to the debts incurred by the company due to financing activities, such as short-term loans, long-term loans, bonds payable, etc. - **Financial assets:** refers to financial instruments held by the company, such as trading financial assets, available-for-sale financial assets, etc. The logic of this formula is to add net liabilities to market value, which more accurately reflects the market recognition of investors for the core operating value of the company.
The core of this factor is to use the book value and market value after deleveraging for calculation. The core idea is: - Using operating net assets as the book value of the numerator can better reflect the value created by the company's operating activities. - Using the market value adjusted for net debt as the denominator can more accurately reflect the market's valuation of the company's core operations. In this way, the factor can more accurately capture the intrinsic value of the company's core operating assets, thereby improving the stock selection ability of value investment.
Represents the total value of assets used by a company for actual operating activities.
Represents the owner's ownership of the company's net assets.
The balance after deducting financial assets from financial liabilities.
The sum of the equity attributable to the parent company and the minority shareholders' equity.
The debts incurred by the company due to financing activities.
Financial instruments held by the company.
A market value concept that adjusts the traditional market value to one that takes into account operating assets and liabilities.
The total market value of a company's stock, usually obtained by multiplying the stock price by the number of shares issued.
factor.explanation
This factor eliminates the impact of corporate financial activities on valuation by using operating net assets instead of traditional book value and using operating net asset market value instead of traditional market value. Its core logic is:
- Value measurement: This factor aims to measure the discount or premium of the value of the company's actual operating assets relative to its market value.
- De-leveraging: By eliminating the impact of financial assets and liabilities, this factor pays more attention to the profitability and asset quality of the company's core operating activities, making the valuation purer.
- Stock selection ability: Empirical studies have shown that this factor can significantly improve the stock selection ability of value stocks and better capture opportunities for market underestimation.
- Value investment: This factor is of great significance in the value investment framework and can be used as one of the indicators to measure whether the valuation of a company is reasonable.