Intangible assets ratio
factor.formula
Intangible assets ratio intensity IAI:
in:
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Represents the total amount of intangible assets generated by the company's internal R&D and operations in period t. $KC_{it}$ usually refers to knowledge capital, mainly the capitalized part related to R&D expenditure; $OC_{it}$ usually refers to the part of operating capital related to intangible assets, such as software development, customer relationships, etc. For specific calculation methods, please refer to the detailed description document of the relevant factors. It is worth noting that the intangible assets here do not include purchased intangible assets.
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Represents the company's total assets at the end of period t.
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Represents the company's goodwill at the end of period t. Goodwill is usually the portion of the purchase price paid by a company when acquiring other companies that is higher than the fair value of the net assets of the acquired company. When calculating the intensity of the intangible asset ratio, goodwill needs to be excluded from total assets because it is not an intangible asset created by the company itself that can continuously bring competitive advantages.
factor.explanation
The intangible asset ratio intensity factor measures the relative importance of intangible assets in the company's asset structure by calculating the ratio of total intangible assets generated by internal research and development and operations to total assets (excluding goodwill). A high intangible asset ratio intensity indicates that the company relies on its internal knowledge, technology, brand and other intangible assets to create value, rather than tangible assets. This factor shows a significant positive correlation with stock returns, indicating that investors generally give higher valuations to companies with a higher ratio of intangible assets. In addition, this factor can also effectively predict the company's future gross profit margin growth potential, because companies with strong intangible assets often have stronger pricing power and higher profitability. The market may underestimate intangible asset-intensive companies when pricing, thereby creating certain investment opportunities. This factor can be used to identify and select such companies with growth potential.