Profit rate of operating assets
factor.formula
Profit rate of operating assets:
Numerator: Gross profit for the last twelve months (TTM)
Denominator: Market value of net operating assets on the day
The calculation formula for the market value of net operating assets is:
The factor is calculated by taking the company's gross profit (TTM) in the last 12 months as the numerator and dividing it by the market value of net operating assets on that day. Among them: - **Gross profit in the last 12 months (TTM)**: Using the rolling 12-month gross profit can smooth seasonal fluctuations and more accurately reflect the company's continued profitability. The formula for calculating gross profit is revenue minus direct costs (such as sales costs), which better reflects the company's core operating profitability and avoids the impact of other non-operating factors and human manipulation on net profit. - **Market value of operating net assets**: This indicator adjusts the total market value to eliminate the impact of financial assets and liabilities, and better reflects the market value of the company's actual operating assets. The calculation method is based on the total market value, plus the company's financial liabilities and minus financial assets. This adjustment makes the factor more comparable for companies with different capital structures.
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The total market value of a company's stock, equal to the current share price multiplied by the total number of shares outstanding.
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Refers to the debts incurred by an enterprise in the financial market, such as short-term loans, long-term loans, bonds payable, etc.
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Refers to financial instruments held by an enterprise that can generate income, such as trading financial assets, financial assets available for sale, etc.
factor.explanation
This factor is the improved reciprocal of the P/E ratio, which improves the effectiveness of the traditional P/E ratio in the following ways:
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Exclude leverage effect: Using the market value of operating net assets instead of the traditional market value adjusts the impact of the company's capital structure, making the valuation of companies with different leverage levels more comparable.
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Exclude financial activity effect: By stripping financial assets and liabilities from the market value, the factor is more focused on measuring the value of the company's core operating activities.
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Avoid expense manipulation: Using gross profit instead of net profit excludes expense items such as sales expenses and administrative expenses that may be manipulated, making the factor more realistically reflect the profitability of the company.
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More accurate valuation: Through the above adjustments, the factor can more accurately reflect the profitability and market value of the company's core operating assets, thereby providing a more effective basis for stock selection.
In summary, the operating asset profit rate of return is a more robust and effective value factor, which has a high application value in quantitative investment.