Factors Directory

Quantitative Trading Factors

Normalized Adjusted Operating Profit (Z-Score)

Quantitative InvestmentGrowth FactorsFundamental factors

factor.formula

Normalized Adjusted Operating Profit (Z-Score):

Adjusted operating profit (TTM):

in:

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    Adjusted operating profit at time t, using rolling 12-month (TTM) data.

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    The mean of the adjusted operating profit TTM over the past T periods (including period t).

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    The standard deviation of adjusted operating profit TTM over the past T periods (including period t).

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    Operating profit at time t, using rolling 12-month (TTM) data.

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    The advance payments at time t are based on the rolling 12-month (TTM) data.

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    Lookback period, default T=6 quarters.

factor.explanation

This factor aims to measure the deviation of a company's current profitability from its historical mean by Z-Score standardization of adjusted operating profit. Specifically, first calculate the adjusted operating profit, which is operating profit plus accounts receivable; then calculate the mean and standard deviation of the adjusted operating profit for the past T quarters (6 quarters by default); finally, perform the standardized calculation through the formula. The higher the Z-Score value obtained, the higher the company's current adjusted operating profit is relative to its historical level, which may indicate a stronger profit growth momentum. On the contrary, it may indicate a decline in profitability. This factor has strong practicality in fundamental quantitative analysis and can be used as one of the key indicators for identifying growth companies or potential profit inflection points.

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