Deleveraged operating asset profit rate of return
factor.formula
Deleveraged operating asset profit rate of return:
Gross profit for the last twelve months (TTM)
Market value of net operating assets
Market value of net operating assets =
in:
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The total gross profit for the last 12 months, using a rolling calculation method, can better reflect the company's recent profitability.
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The market value of net operating assets represents the total market value of assets related to the company's main operating activities. It is calculated by adding financial liabilities to financial assets.
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It is the total market value of a company, usually referring to the total value of its outstanding shares.
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The financial liabilities of an enterprise mainly include interest-bearing liabilities, etc. These liabilities are directly related to the financial activities of the enterprise rather than its operating activities.
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Financial assets of an enterprise mainly include trading financial assets, etc. These assets are directly related to the financial activities of the enterprise rather than its operating activities.
factor.explanation
This factor is an improved form of the inverse of the price-earnings ratio (PE). By introducing the market value of operating net assets and gross profit, it effectively eliminates the impact of corporate leverage, non-operating assets and controllable expenses. Specifically:
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Operating Net Asset Market Value: Using "Market Value + Financial Liabilities - Financial Assets" instead of traditional market value can more accurately reflect the market value of the company's core operating assets. Financial liabilities represent liabilities incurred by the company due to financing activities, and financial assets represent financial investments owned by the company. Both are irrelevant to core operating activities and therefore need to be eliminated.
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TTM Gross Profit: Using gross profit instead of net profit, gross profit more directly reflects the profitability of the company's main business, avoids the risk of profit manipulation caused by sales, management, R&D and other expenses, and also makes earnings more comparable. The TTM calculation method can smooth single-quarter fluctuations and better reflect the company's true profitability.
This factor can more accurately capture the intrinsic value of a company and can be better used to compare companies with different leverage ratios and different non-operating asset ratios, thereby improving the effectiveness of value stock selection.