Knowledge Base — Fiscal Wizard

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Fundamental metric / Valuation

P/E Ratio

↓ lower is better x #pe_ratio

Price you pay per dollar of trailing earnings.

How many dollars of share price the market is willing to pay for one dollar of trailing-twelve-month earnings. The universal valuation anchor for profitable companies — useful for cross-sector comparison and as a quick read on whether the market expects earnings growth, decline, or a quality re-rating. Sensitive to one-off items in the denominator (write-downs, tax holidays, share buybacks); pair with EV/EBITDA when capital structure or non-cash charges look noisy.

i Measure

Typical range 5x to 40x

ii Formula

P/E = market_cap / net_income_ttm

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
net_income_ttm: Trailing-twelve-month net income. $

iii Interpretation

When high Market is paying a premium because it expects earnings to grow, margins to expand, or the franchise to deserve a quality re-rating. Verify the growth is in forward estimates and not just a P/E inflated by a temporarily depressed denominator.
When mid-range Multiple sits in line with the broad market and most large-cap sectors. Look at growth, margins, and FCF conversion to decide whether it's fairly priced or quietly mispriced.
When low Either a genuine bargain or earnings about to fall. Check FCF margin, cash conversion, and forward EPS estimates before assuming it's a value play — single-digit P/Es most often pair with structural decline or a heavily cyclical business at the top of its earnings cycle.

Fundamental metric / Valuation

P/B Ratio

↓ lower is better x #pb_ratio

Price relative to book value of common equity.

Share price divided by per-share book value of common equity — what the market values the franchise at versus what the accountants say it's worth on paper. Most informative for asset-heavy businesses (banks, insurers, industrials) where book value approximates a liquidation floor; far less informative for asset-light franchises whose value sits in brand, software, or other intangibles that GAAP under-states or excludes entirely.

i Measure

Typical range 1x to 15x

ii Formula

P/B = market_cap / common_equity

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
common_equity: Book value attributable to common shareholders — total equity minus preferred. $

iii Interpretation

When high Market values the franchise far above its book equity — typical for branded consumer, software, and platform businesses where the brand and customer relationships are worth more than the depreciated PP&E on the balance sheet.
When mid-range P/B in the broad-market range. Read alongside ROE: a 3x P/B with 25% ROE is more defensible than a 3x P/B with 8% ROE.
When low Trading near or below book — sometimes a margin of safety (when the assets are real and the business earns its cost of capital), sometimes a sign book value will be impaired (banks before a credit cycle, retailers before a write-down).

Fundamental metric / Valuation

PEG Ratio

↑ higher is better x #peg_ratio

P/E adjusted for earnings growth — cheap relative to growth when below 1.

Divides the trailing P/E by the year-over-year EPS growth rate (in percentage points). Below 1.0 is conventionally read as 'cheap relative to growth'; above 2 implies the multiple is well ahead of recent growth. Sensitive to which growth window you choose and unstable when earnings cross zero — flips sign or explodes when prior EPS is negative.

i Measure

Typical range 0.5x to 3.0x

ii Formula

PEG = (P/E) / eps_growth_3y_pct

eps_growth_3y_pct: Annualised EPS growth over the trailing three years, expressed as a percent. %

iii Interpretation

When high Multiple is rich relative to recent growth — either the growth pace continues (and the multiple was right), the growth disappoints (and the multiple compresses), or you're paying for a quality re-rating that may not arrive.
When mid-range PEG in the standard 1–2x range — multiple roughly tracks growth. Decision usually comes from a different lens (FCF yield, balance sheet, sector dynamics).
When low Multiple looks cheap relative to recent growth. The trap: confirm the growth is sustainable, not a one-off rebound off a depressed prior period or a margin spike that's about to mean-revert.

Fundamental metric / Valuation

EV/EBITDA

↓ lower is better x #ev_ebitda

Enterprise value relative to operating cash earnings before D&A.

What it would cost to take over the entire firm (equity plus debt, less cash) per dollar of pre-interest, pre-tax, pre-depreciation operating earnings. Capital-structure-agnostic — directly comparable across heavily and lightly levered businesses, which a P/E can't do. The weakness: EBITDA ignores capex, so capital-intensive businesses look artificially cheap on this metric. Cross-check with EV/FCF when capex is meaningful.

i Measure

Typical range 6x to 25x

ii Formula

EV = market_cap + total_debt + preferred_equity + minority_interest - cash; EV/EBITDA = EV / ebitda_ttm

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
total_debt: Short-term plus long-term interest-bearing debt. $
preferred_equity: Book value of preferred shares — sits between debt and common in the capital stack. $
minority_interest: Equity held by outside shareholders in consolidated subsidiaries. $
cash: Cash and short-term equivalents on the balance sheet. $
ebitda_ttm: Trailing-twelve-month EBITDA. $

iii Interpretation

When high Operating profile commands a premium against the takeover-cost view of the firm. Justified when EBITDA-to-FCF conversion is high (capex is light), the moat is durable, and growth is real.
When mid-range EV/EBITDA in the broad-market range. The decision usually hinges on capital structure, growth, and capex intensity — read with EV/FCF.
When low Cheap on cash earnings — but check whether D&A is masking real reinvestment needs that EBITDA doesn't capture. The 'EBITDA isn't free cash flow' trap is most painful here.

Fundamental metric / Valuation

P/S Ratio

↓ lower is better x #ps_ratio

Price per dollar of trailing revenue.

Useful when earnings are negative, noisy, or one-time-distorted (early-stage growth, restructurings, cyclical troughs). Works best within an industry, not across — gross margin profiles vary so wildly that 1x P/S for a software company means something completely different from 1x P/S for a grocery chain.

i Measure

Typical range 0.5x to 15x

ii Formula

P/S = market_cap / revenue_ttm

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
revenue_ttm: Trailing-twelve-month revenue. $

iii Interpretation

When high Market is paying up for revenue — implicitly betting on future margin expansion, durable revenue growth, or both. Common in software and consumer-platform names where current earnings understate steady-state economics.
When mid-range P/S in the broad-market range. Read alongside gross margin and growth — same multiple can be cheap or expensive depending on the unit economics underneath.
When low Cheap on revenue. Investigate whether margins are structurally low (commodity producer, contract manufacturer) or revenue quality is poor (one-time contracts, channel-stuffing).

Fundamental metric / Valuation

EV/Sales

↓ lower is better x #ev_sales

EV-based revenue multiple — capital-structure-neutral version of P/S.

Adjusts the numerator for debt and cash so heavily-levered or cash-rich companies become comparable on a revenue-multiple basis. Particularly useful for cross-industry valuation work where some firms run net cash and others carry meaningful debt loads. Same caveats as P/S: best read alongside gross margin to translate the multiple into expected steady-state earnings power.

i Measure

Typical range 0.5x to 15x

ii Formula

EV/Sales = (market_cap + total_debt - cash) / revenue_ttm

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
total_debt: Short-term plus long-term interest-bearing debt. $
cash: Cash and short-term equivalents on the balance sheet. $
revenue_ttm: Trailing-twelve-month revenue. $

iii Interpretation

When high Premium revenue multiple even after netting cash — usually indicates the market is pricing in high gross margins, durable growth, or scarce assets.
When mid-range EV/Sales in the broad-market range. Read with gross margin and FCF margin to understand the steady-state earnings the multiple implies.
When low Cheap on revenue once you account for the balance sheet. Confirm gross margin is structurally workable and the business isn't carrying invisible debt that compresses the equity claim.

Fundamental metric / Valuation

EV/FCF

↓ lower is better x #ev_fcf

Enterprise value relative to free cash flow generation.

Valuation expressed against the cash actually available to all capital providers after capex. Often more honest than EV/EBITDA when capital expenditure is meaningful relative to depreciation, because EBITDA ignores capex entirely while FCF reflects it. The cleanest single-number 'what would I pay to own this whole business?' valuation lens for capital-intensive firms.

i Measure

Typical range 10x to 40x

ii Formula

EV/FCF = (market_cap + total_debt - cash) / free_cash_flow_ttm

market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
total_debt: Short-term plus long-term interest-bearing debt. $
cash: Cash and short-term equivalents on the balance sheet. $
free_cash_flow_ttm: Trailing-twelve-month free cash flow. $

iii Interpretation

When high Expensive on cash generation — growth or quality must justify the premium. Pricing is implicitly betting that FCF compounds materially from here.
When mid-range EV/FCF in the broad-market range. Most large-cap industrials and consumer staples cluster here.
When low Cheap on free cash flow — confirm FCF is sustainable and not propped up by working-capital release, deferred capex, or one-time tax benefits that will reverse.

Fundamental metric / Valuation

Forward P/E

↓ lower is better x #forward_pe

Price relative to consensus next-12-month earnings.

The multiple equity analysts most commonly quote because it reflects expected earnings rather than the trailing window. Same caveats as trailing P/E plus one extra: the denominator depends on consensus estimates, which can be systematically optimistic going into a downturn or pessimistic at a cyclical trough. Worth cross-checking against trailing P/E and sell-side estimate trend.

i Measure

Typical range 8x to 30x

ii Formula

Forward P/E = price / forward_eps

price: Current share price. $
forward_eps: Sell-side consensus estimate of next-twelve-month earnings per share. $/share

iii Interpretation

When high Premium expected-earnings multiple — growth or quality must justify the price. Verify the consensus growth trajectory is achievable.
When mid-range Forward multiple in the broad-market range. Read with the gap to trailing P/E — a widening gap implies analysts expect strong forward growth.
When low Cheap on next-year earnings — confirm the consensus number is plausible, not a stale estimate that hasn't been cut after a rough quarter.

Fundamental metric / Valuation

PEGY

↑ higher is better x #peg_y

Lynch's dividend-aware PEG — fair value when P/E equals growth plus yield.

Peter Lynch's adjustment to PEG: adds the dividend yield to the growth rate in the denominator so that mature dividend payers don't get unfairly punished by a low growth rate alone. Sweet spot is 1.0 (P/E equals growth plus yield); below 0.5 often signals a broken growth assumption rather than genuine value; above 2 is over-paying.

i Measure

Typical range 0.5x to 3x

ii Formula

PEGY = (P/E) / (eps_growth_rate_pct + dividend_yield_pct)

eps_growth_rate_pct: Year-over-year EPS growth, expressed as a percent — 18.6 means 18.6%. %
dividend_yield_pct: Trailing dividends per share divided by current share price, expressed as a percent. %

iii Interpretation

When high Multiple expensive relative to growth-plus-income combined — either growth needs to accelerate or the multiple compresses.
When mid-range Reasonably priced relative to growth-plus-income. Lynch's classic fair-value zone.
When low Cheap relative to growth-plus-income — confirm both numbers are real and the growth isn't a one-off rebound.

Fundamental metric / Valuation

Greenblatt EY

↑ higher is better % #greenblatt_earnings_yield

Greenblatt's Magic-Formula earnings yield — EBIT over EV.

Capital-structure-agnostic earnings yield. Pairs with Greenblatt ROC to compute the famous Magic Formula rank (the universe-rank of earnings yield plus universe-rank of return on capital). Pre-tax operating earnings divided by the full claim on the firm gives a cleaner cross-firm valuation comparison than P/E or earnings yield alone, because it strips out the distortions from leverage, cash, and tax structure.

i Measure

Typical range 3% to 15%

ii Formula

Greenblatt EY = EBIT / Enterprise Value * 100

iii Interpretation

When high Strong operating earnings yield against the full enterprise claim — a Magic Formula favourite when paired with high return on capital.
When mid-range Operating earnings yield in the broad-market range. Use alongside Greenblatt ROC to see how the Magic Formula composite scores the name.
When low Limited operating earnings against EV — growth or quality must justify the valuation.

Fundamental metric / Valuation

Margin of Safety

↑ higher is better % #margin_of_safety

Discount of price to residual-income intrinsic value. Positive = trading below fair value.

An ABSOLUTE intrinsic-value signal, distinct from the relative multiples (PE, EV/EBITDA) which only compare a stock to its industry peers. Intrinsic value comes from the Residual Income Model: book value plus the present value of the residual income (earnings above a charge for the cost of equity) the firm is forecast to generate. This is the best-VALIDATED absolute value signal in the academic literature (Frankel & Lee 1998, replicated through 2026): the value-to-price ratio robustly predicts 1-3 year cross-sectional returns, survives every major factor model, and subsumes book-to-market. Because it is scored across the WHOLE universe (not within-industry), it complements the relative multiples rather than double-counting them. Pair it with a quality screen (Piotroski) to avoid value traps, and read the EPV decomposition to see whether a discount is unpriced earnings power or just speculative growth coming out of the price. One caveat: the model anchors on book equity, so for low-book, buyback-heavy, or asset-light firms (think Apple or Coca-Cola) book is a poor floor and the model can read durable franchises as wildly overvalued. Readings are clamped, and the metric is currently shadow-scored — shown for context, with zero weight in the fundamentals grade — pending validation.

i Measure

Typical range -30% (overvalued) to +40% (deep discount)

ii Formula

MoS = (V - price) / price * 100 (clamped to [-100, 200]), where V = book_value_per_share + (forward_eps - r*book_value_per_share) / (1 + r - omega) is the Residual Income Model intrinsic value (r = cost of equity ~11%, omega = residual-income persistence ~0.6). Positive = upside to fair value (undervalued).

price: Current share price. $
forward_eps: Sell-side consensus estimate of next-twelve-month earnings per share. $/share

iii Interpretation

When high Trading at a meaningful discount to residual-income intrinsic value — a genuine margin of safety. Strongest when backed by quality (high Piotroski F-Score) and when the EPV decomposition shows the gap is unpriced earnings power rather than a melting asset base (a value trap).
When mid-range Price is near residual-income fair value — limited absolute upside or downside from valuation alone. The relative multiples and the growth/quality picture will drive the call here.
When low Trading ABOVE residual-income intrinsic value — the market is pricing in growth and excess returns beyond what current book and forecast earnings justify. Acceptable for a genuine compounder, dangerous if the growth disappoints. Cross-check the reverse-DCF implied growth.

Fundamental metric / Profitability

Return on Equity

↑ higher is better % #roe

Net income earned per dollar of common equity.

The headline profitability metric. Net income divided by average book equity tells you how productive each dollar of shareholders' capital is. High sustained ROE compounds book value when the business can reinvest at a similar return. Two warnings: ROE rises mechanically with leverage (high D/E inflates ROE without making the business better), and aggressive buybacks can shrink the equity denominator faster than they shrink earnings, artificially boosting ROE even as fundamental returns are flat.

i Measure

Typical range 10% to 40%

ii Formula

ROE = (net_income_ttm / average_common_equity) * 100

net_income_ttm: Trailing-twelve-month net income. $
average_common_equity: Average of beginning and ending common equity — denominator for return-on-equity-style metrics. $

iii Interpretation

When high Capital is being put to work effectively. Sustainable when supported by real economic moats, structural pricing power, or a high-margin asset-light business model — not just leverage.
When mid-range ROE in the broad-market range for large-cap profitable firms. Decompose via DuPont (margin × turnover × leverage) to see whether the engine is operating efficiency, asset turnover, or balance-sheet leverage.
When low Equity earning power is weak — sometimes due to over-capitalisation (excess cash on a strong balance sheet), sometimes genuine underperformance. Check ROIC: if ROIC is also low, the business is destroying value at its cost of capital.

Fundamental metric / Profitability

Return on Invested Capital

↑ higher is better % #roic

After-tax operating return on the capital actually invested in the business.

Measures how productive the actual operating capital base is, independent of capital structure. Strips out the effects of cash, leverage, and below-the-line items so you see the underlying economic engine. The benchmark is the firm's weighted-average cost of capital (WACC) — sustained ROIC above WACC creates value, sustained ROIC below WACC destroys it. The single most important profitability metric for long-term compounding.

i Measure

Typical range 8% to 30%

ii Formula

NOPAT = operating_income_ttm * (1 - effective_tax_rate); invested_capital = shareholders_equity + total_debt - cash; ROIC = NOPAT / avg_invested_capital * 100

operating_income_ttm: Trailing-twelve-month operating income. $
effective_tax_rate: Tax expense divided by pre-tax income. %
shareholders_equity: Book value left for common + preferred shareholders after liabilities are paid. $
total_debt: Short-term plus long-term interest-bearing debt. $
cash: Cash and short-term equivalents on the balance sheet. $
avg_invested_capital: Average of beginning and ending invested capital — smooths balance-sheet timing for ROIC. $

iii Interpretation

When high Strong economic engine — the business earns well above its cost of capital. Pair with reinvestment rate to estimate intrinsic compounding (ROIC × reinvestment rate ≈ steady-state growth).
When mid-range ROIC in the workable range. Compare to estimated WACC for the business — the spread (ROIC minus WACC) tells you whether each dollar reinvested grows shareholder wealth.
When low Operating capital is being deployed unproductively. Watch for businesses earning less than their cost of capital — every dollar of growth investment shrinks intrinsic value rather than growing it.

Fundamental metric / Profitability

Greenblatt ROC

↑ higher is better % #greenblatt_roc

Greenblatt's Magic-Formula return on capital — pre-tax EBIT over operating tangible capital.

Joel Greenblatt's reformulation of return-on-capital, designed to filter for businesses that earn high pre-tax returns on the tangible operating capital that actually generates EBIT. Excludes goodwill and acquired intangibles so that two firms with the same operating economics rank similarly regardless of acquisition history. Pairs with Greenblatt's Earnings Yield (EBIT/EV) to produce the famous 'Magic Formula' rank — quality stocks at value prices.

i Measure

Typical range 15% to 60%

ii Formula

Greenblatt ROC = EBIT / (working_capital + net_fixed_assets) * 100

working_capital: Current assets minus current liabilities — short-term operating liquidity. $
net_fixed_assets: Property, plant and equipment net of accumulated depreciation. $

iii Interpretation

When high Operating tangible capital is throwing off heavy pre-tax earnings — a Magic Formula favourite. Indicates a business model with real operating leverage and pricing power.
When mid-range Greenblatt ROC in the broad-market range. Use alongside Greenblatt Earnings Yield to see how the Magic Formula composite scores the name.
When low Operating capital is producing limited EBIT relative to its size. Either a capital-intensive business at the bottom of its margin cycle or a structurally low-return industry where reinvestment doesn't compound.

Fundamental metric / Profitability

Return on Assets

↑ higher is better % #roa

Net income per dollar of total assets.

Capital-efficiency measure that ignores how the assets are financed. Useful for comparing within a sector but heavily biased by industry — banks and utilities run low ROA by design (huge balance sheets), software and franchise businesses run high ROA (asset-light). The DuPont decomposition links it to ROE: ROE = ROA × (assets / equity), so leverage inflates the gap between ROA and ROE.

i Measure

Typical range 2% to 20%

ii Formula

ROA = (net_income_ttm / average_total_assets) * 100

net_income_ttm: Trailing-twelve-month net income. $
average_total_assets: Average of beginning and ending total assets — denominator that smooths balance-sheet timing. $

iii Interpretation

When high Assets are working hard — typical of asset-light, high-margin businesses (software, franchises, branded consumer).
When mid-range ROA in the broad-market range. Compare within sector — same ROA can be excellent for an industrial and weak for a software company.
When low Heavy asset base needed to generate each dollar of profit — common in capital-intensive industries (utilities, telecoms, heavy industrial). Check whether the depressed ROA reflects the industry or the specific company.

Fundamental metric / Profitability

Operating Margin

↑ higher is better % #operating_margin

Operating profit per dollar of revenue, before interest and tax.

Captures the leverage between revenue and operating profit — the core test of whether a business converts sales into income at the operating level. Independent of capital structure (excludes interest) and tax-jurisdiction noise. Trend matters as much as level: an improving operating margin indicates pricing power or operational efficiency gains; a falling margin signals input-cost pressure, wage inflation, or competitive erosion.

i Measure

Typical range 5% to 35%

ii Formula

Operating Margin = (operating_income_ttm / revenue_ttm) * 100

operating_income_ttm: Trailing-twelve-month operating income. $
revenue_ttm: Trailing-twelve-month revenue. $

iii Interpretation

When high Pricing power and operating leverage. Software platforms and asset-light franchises commonly run above 30%; durable margin at this level is the hallmark of a moat.
When mid-range Operating margin in the broad-market range. Watch the trend — flat-to-improving is healthy, deteriorating margin paired with rising revenue often means discount-led volume rather than real growth.
When low Thin profit per dollar of revenue — exposed to input cost or wage shocks. Common in commodity producers, contract manufacturers, and unscaled businesses.

Fundamental metric / Profitability

Net Margin

↑ higher is better % #net_margin

Bottom-line earnings per dollar of revenue.

Operating margin minus interest, tax, and below-the-line items. Useful but noisier than operating margin: tax rate changes, debt-service shifts, and one-time items can move net margin year-over-year even when the operating business is unchanged. Always pair with operating margin and FCF margin — divergence between them is a tell about leverage, tax structure, or earnings quality.

i Measure

Typical range 3% to 30%

ii Formula

Net Margin = (net_income_ttm / revenue_ttm) * 100

net_income_ttm: Trailing-twelve-month net income. $
revenue_ttm: Trailing-twelve-month revenue. $

iii Interpretation

When high Strong all-in profitability after every expense category. Sustainable when the operating margin engine is structural, not when net margin is temporarily inflated by tax holidays or one-time gains.
When mid-range Net margin in the broad-market range. Compare to operating margin — if the gap is large, leverage or a high tax rate is doing the work.
When low Either operating margins are thin or below-the-line items are eating earnings. Check: high interest expense (leveraged), high effective tax (jurisdictional or one-time), or recurring impairments / restructuring charges.

Fundamental metric / Profitability

Gross Margin

↑ higher is better % #gross_margin

Revenue minus COGS, as a percentage of revenue.

First-line profitability measure — how much revenue is left after the direct cost of producing it. Stable or rising gross margin signals pricing power and low input-cost exposure; falling gross margin is one of the earliest reliable signals of competitive pressure or commodity-input squeeze. Industry context is everything: 30% gross margin is excellent for a grocery chain and disastrous for a software company.

i Measure

Typical range 20% to 80%

ii Formula

Gross Margin = ((revenue_ttm - cogs_ttm) / revenue_ttm) * 100

revenue_ttm: Trailing-twelve-month revenue. $
cogs_ttm: Trailing-twelve-month cost of goods sold. $

iii Interpretation

When high Strong unit economics — software, branded consumer, and IP-heavy businesses cluster here. Defensible as long as the moat (brand, switching costs, network effect) holds.
When mid-range Gross margin in the broad-market range for industrials and services. Watch the trend: stable beats high-and-falling.
When low Heavy COGS load — typical of commodity producers, contract manufacturers, traditional retail. Small input-cost shocks can flip the income statement, so check input-cost hedging and pricing-pass-through ability.

Fundamental metric / Profitability

Asset Turnover

↑ higher is better x #asset_turnover

Revenue generated per dollar of assets.

Productivity of the asset base — how efficiently the firm converts assets into sales. Combined with net margin, this is the core of the DuPont decomposition: ROA = net margin × asset turnover. Two businesses can land at the same ROA via opposite paths: thin-margin / high-turnover (Costco, supermarkets) vs. fat-margin / low-turnover (luxury, software).

i Measure

Typical range 0.3x to 2.5x

ii Formula

Asset Turnover = revenue_ttm / average_total_assets

revenue_ttm: Trailing-twelve-month revenue. $
average_total_assets: Average of beginning and ending total assets — denominator that smooths balance-sheet timing. $

iii Interpretation

When high Revenue compounds quickly off the asset base — retail, consumer staples, and asset-light services run high here. Pair with margin to understand the unit-economics story.
When mid-range Asset turnover in the broad-market range. The decision usually hinges on margin profile and reinvestment economics, not on turnover alone.
When low Heavy assets needed per dollar of revenue — utilities, telecoms, heavy industrial, capital goods. Often the right number for the industry, but compounds the impact of any margin compression.

Fundamental metric / Profitability

FCF Margin

↑ higher is better % #fcf_margin

Free cash flow per dollar of revenue.

End-to-end conversion ratio: of every dollar of revenue, how much falls through to genuine free cash flow available to all capital providers? More honest than net margin because it accounts for the capex needed to maintain (and grow) the business. The single best indicator of whether the business is a quality compounder or a GAAP-earnings illusion.

i Measure

Typical range 5% to 30%

ii Formula

FCF Margin = (free_cash_flow_ttm / revenue_ttm) * 100

free_cash_flow_ttm: Trailing-twelve-month free cash flow. $
revenue_ttm: Trailing-twelve-month revenue. $

iii Interpretation

When high Cash flowing through to owners — the hallmark of high-quality compounders. Capital-light franchises and software platforms cluster above 25%.
When mid-range FCF margin in the broad-market range. Most large-cap industrials and consumer firms sit here.
When low Revenue isn't translating into cash — either capex is heavy (capital-intensive industry) or working capital is consuming it (receivables and inventory growing faster than sales). Persistent low FCF margin is a long-term return killer regardless of GAAP earnings.

Fundamental metric / Profitability

Cash Conversion

↑ higher is better x #cash_conversion

How much of accounting net income converts to free cash flow.

Sanity-check on earnings quality — a ratio of 1.0 means every dollar of GAAP earnings shows up as free cash flow. Persistently below 1.0 means working-capital build or capex is consuming earnings; persistently above 1.0 is unusual and may flag accounting conservatism (heavy non-cash charges) or a one-time release. Trend matters more than absolute level.

i Measure

Typical range 0.6x to 1.4x

ii Formula

Cash Conversion = free_cash_flow_ttm / net_income_ttm

free_cash_flow_ttm: Trailing-twelve-month free cash flow. $
net_income_ttm: Trailing-twelve-month net income. $

iii Interpretation

When high Earnings quality is good — real cash arriving in step with reported income, sometimes more (when D&A overstates true economic depreciation).
When mid-range Cash conversion in the broad-market range. Most healthy firms run between 0.8x and 1.2x over a full cycle.
When low Earnings exceed cash — common late-cycle warning when receivables and inventories are building. If sustained, the GAAP earnings story is unreliable; check the working-capital movements on the cash-flow statement.

Fundamental metric / Profitability

OCF to Net Income

↑ higher is better x #ocf_to_net_income

Operating cash flow vs. net income — earnings-quality cross-check.

Pre-capex version of cash conversion: compares operating cash flow directly to net income, before subtracting capex. Numbers persistently below 1.0 suggest accruals are doing the work (revenue recognised before cash collected, or expenses deferred). Numbers above 1.0 are typically driven by D&A exceeding true economic depreciation — a mild positive sign but not always meaningful.

i Measure

Typical range 0.8x to 1.6x

ii Formula

OCF/NI = operating_cash_flow_ttm / net_income_ttm

operating_cash_flow_ttm: Trailing-twelve-month operating cash flow. $
net_income_ttm: Trailing-twelve-month net income. $

iii Interpretation

When high Operating cash flow validates net income — accrual quality is high, GAAP earnings are backed by real cash collection.
When mid-range OCF/NI in the broad-market range. Most healthy firms run between 1.0x and 1.4x.
When low Net income running ahead of operating cash. Check accruals (receivables, deferred revenue, inventories): widening gaps suggest either aggressive revenue timing or working-capital absorption that will eventually bite the cash statement.

Fundamental metric / Profitability

Return on Capital Employed

↑ higher is better % #roce

Operating return on long-term capital employed.

Pre-tax cousin of ROIC using operating capital employed (long-term debt plus equity, approximately equal to total assets minus current liabilities). Damodaran publishes ROCE by industry annually, so it benchmarks cleanly against sector norms. Particularly useful for capital-intensive businesses where you want to see pre-tax returns on the long-term capital base.

i Measure

Typical range 8% to 30%

ii Formula

ROCE = ebit / (total_assets - current_liabilities) * 100

ebit: Earnings Before Interest and Taxes — operating income before financing costs and tax. $
total_assets: Sum of all assets on the balance sheet at period end. $
current_liabilities: Obligations due within twelve months. $

iii Interpretation

When high Operating capital is producing strong pre-tax returns — efficient deployment of long-term invested capital.
When mid-range ROCE in the workable range for the sector. Compare to Damodaran's industry composites to gauge relative efficiency.
When low Operating capital is producing weak returns — watch the gap to estimated cost of capital. Sustained ROCE below cost of capital destroys value as the business reinvests.

Fundamental metric / Profitability

EBITDA Margin

↑ higher is better % #ebitda_margin

EBITDA per dollar of revenue — capital-structure-neutral profitability.

Easier to compare than operating margin across firms with very different leverage and depreciation profiles, because it adds D&A back. Software platforms commonly run above 30%; capital-light service businesses cluster around 20%; capital-intensive industrials sit below 15%. The weakness: ignores the cash needed to maintain the asset base — pair with FCF margin for a complete profitability picture.

i Measure

Typical range 8% to 35%

ii Formula

EBITDA Margin = ebitda / revenue * 100

ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortisation — a rough proxy for operating cash generation. $
revenue: Top-line sales over the most recent reporting period. $

iii Interpretation

When high Strong cash earnings before D&A — high operating leverage, often paired with structural pricing power.
When mid-range EBITDA margin in the broad-market range. Compare to FCF margin: a wide gap means heavy capex relative to depreciation.
When low Thin EBITDA per dollar of revenue — exposed to input cost or wage shocks. Operating leverage works against the business when revenue dips.

Fundamental metric / Profitability

Capex to Sales

↓ lower is better % #capex_to_sales

Capital intensity per dollar of revenue.

Lower is generally better for shareholder cash returns — less of every dollar of revenue gets reinvested in maintaining the asset base. But very low values can flag under-investment in a capital-intensive business, which catches up later via deteriorating capacity or competitiveness. Pairs with FCF margin to separate 'thin operating margin' from 'fat operating margin offset by heavy capex'.

i Measure

Typical range 0% to 15%

ii Formula

Capex to Sales = capital_expenditures_ttm / revenue * 100

capital_expenditures_ttm: Trailing-twelve-month capital expenditures. $
revenue: Top-line sales over the most recent reporting period. $

iii Interpretation

When high Heavy capex needed per dollar of revenue — utilities, energy, semiconductor, and heavy industrial territory. Often the right number for the industry, but raises the bar for FCF generation.
When mid-range Capital intensity in the broad-market range for industrials and consumer firms.
When low Asset-light — software, services, branded consumer. Frees up cash flow for buybacks, dividends, and acquisitions but check that the low capex isn't masking under-investment.

Fundamental metric / Growth

Revenue Growth (YoY)

↑ higher is better percent #revenue_growth

Year-over-year change in trailing revenue.

Top-line growth — the cleanest way to see whether the franchise is expanding. Best read alongside margin trend: revenue rising while margin compresses is often discount-driven volume rather than real growth, and can mask underlying weakness. Compare to industry peers — what looks weak in absolute terms can be best-in-sector if the industry is contracting.

i Measure

Typical range -10% to +30%

ii Formula

Revenue Growth = (revenue_ttm - revenue_prior_ttm) / revenue_prior_ttm

revenue_ttm: Trailing-twelve-month revenue. $
revenue_prior_ttm: Revenue from the trailing twelve months ending one year ago — denominator for YoY growth. $

iii Interpretation

When high Top line is expanding meaningfully. Watch whether margins keep pace — high-margin growth compounds, discount-led growth often doesn't.
When mid-range Modest top-line expansion — within the broad-market range for mature large-caps.
When low Revenue flat or declining — the growth engine is paused or in reverse. Investigate whether it's cyclical (likely to recover), competitive (margin compression to follow), or structural (the franchise is shrinking).

Fundamental metric / Growth

EPS Growth (YoY)

↑ higher is better percent #eps_growth

Year-over-year change in diluted earnings per share.

Bottom-line growth on a per-share basis — captures both operating progress and any net buyback effect. The denominator uses the absolute value of prior EPS so a turnaround from negative to positive earnings reads with the conventional sign rather than producing arithmetic nonsense. Pair with revenue growth to separate real franchise expansion from buyback-driven per-share lift.

i Measure

Typical range -15% to +30%

ii Formula

EPS Growth = (diluted_eps_ttm - diluted_eps_prior_ttm) / abs(diluted_eps_prior_ttm)

diluted_eps_ttm: Trailing-twelve-month diluted earnings per share. $/share
diluted_eps_prior_ttm: Diluted EPS for the trailing twelve months ending one year ago. $/share

iii Interpretation

When high Earnings per share are compounding meaningfully. Decompose into revenue growth, margin expansion, and buyback contribution to understand the source.
When mid-range EPS growth in the broad-market range. Read with payout ratio — the unpaid earnings should be reinvesting at a return that compounds.
When low EPS shrinking — either earnings deteriorated, share count expanded faster than profit (dilutive issuance), or both.

Fundamental metric / Balance Sheet

Debt-to-Equity

↓ lower is better x #debt_to_equity

Capital-structure leverage — total debt relative to equity book value.

How much the company funds itself with debt vs. equity. Higher leverage amplifies both returns (through ROE) and risk (through interest coverage and refinancing exposure). The 'right' level varies enormously by industry — utilities and REITs run higher than industrials, software runs near zero. Becomes unstable when book equity is small or negative; complement with debt-to-assets in those cases.

i Measure

Typical range 0.0x to 2.0x

ii Formula

Debt-to-Equity = total_debt / common_equity

total_debt: Short-term plus long-term interest-bearing debt. $
common_equity: Book value attributable to common shareholders — total equity minus preferred. $

iii Interpretation

When high Capital structure is debt-heavy — amplifies equity returns in good times but also stress in downturns. Check interest coverage and refinancing windows.
When mid-range Leverage in the broad-market range for established large-caps.
When low Conservative balance sheet — lower bankruptcy risk, but may be under-levered for shareholder returns. Net-cash positions can also signal a lack of attractive reinvestment opportunities.

Fundamental metric / Balance Sheet

LT Debt-to-Equity

↓ lower is better x #lt_debt_to_equity

Long-term debt portion of leverage — structural balance-sheet risk.

Strips out short-term operating debt and revolver use to focus on the permanent capital structure. Useful when comparing companies that fund working capital differently — a high D/E that's mostly short-term commercial paper means something different from a high D/E that's mostly long-dated bonds. Watch refinancing maturities alongside the level.

i Measure

Typical range 0.0x to 1.5x

ii Formula

LT D/E = long_term_debt / common_equity

long_term_debt: Debt with maturities greater than twelve months. $
common_equity: Book value attributable to common shareholders — total equity minus preferred. $

iii Interpretation

When high Permanent leverage is high. Check coverage ratios, debt maturity profile, and the spread between coupon and cost of capital — refinancing in a higher-rate environment can reset the economics meaningfully.
When mid-range Long-term leverage in the broad-market range.
When low Permanent debt is low — balance-sheet flexibility for opportunistic deals, share repurchases, or weathering a downturn.

Fundamental metric / Balance Sheet

Current Ratio

↑ higher is better x #current_ratio

Short-term liquidity — current assets relative to current liabilities.

Whether the company can cover near-term obligations from near-term assets. Below 1.0 doesn't necessarily mean insolvent (operating cash flow can cover the gap), but it's worth a closer look. Conversely, very high current ratios can signal trapped working capital that's earning no return.

i Measure

Typical range 1.0x to 3.0x

ii Formula

Current Ratio = current_assets / current_liabilities

current_assets: Assets expected to convert to cash within twelve months. $
current_liabilities: Obligations due within twelve months. $

iii Interpretation

When high Comfortable liquidity buffer — large working-capital cushion. Verify the assets are productive (cash, fast-turning receivables) rather than stale (slow inventory, doubtful receivables).
When mid-range Current ratio in the healthy range. Most large-cap industrials and consumer firms cluster between 1.5x and 2.5x.
When low Short-term obligations exceed short-term assets. Watch cash-flow timing — businesses with strong, predictable operating cash can run sub-1.0 indefinitely (think large retailers); businesses with lumpy cash flow can't.

Fundamental metric / Balance Sheet

Cash Ratio

↑ higher is better x #cash_ratio

Pure-cash coverage of current liabilities — the strictest liquidity test.

Strips out receivables and inventory entirely, leaving only cash and equivalents over current liabilities. Stress-tests whether the business can meet its near-term obligations even if collections seize up and inventory becomes unsaleable. The harshest, simplest liquidity check — used as a credit-stress indicator.

i Measure

Typical range 0.1x to 1.5x

ii Formula

Cash Ratio = cash_and_equivalents / current_liabilities

cash_and_equivalents: Cash plus highly-liquid short-term securities (typically <90 day maturity). $
current_liabilities: Obligations due within twelve months. $

iii Interpretation

When high Heavy cash backstop — common with profitable cash-rich franchises (mature tech, branded consumer). Provides resilience but also raises the question of why capital isn't being deployed.
When mid-range Cash ratio in the workable range. Sufficient to absorb most short-term shocks without forcing the company to lean on receivables collection.
When low Liquidity depends on receivables and inventory turning — vulnerable to working-capital shocks (channel disruption, customer payment delays, inventory obsolescence).

Fundamental metric / Balance Sheet

Altman Z-Score

↑ higher is better score #altman_z

Composite bankruptcy-risk score — higher is safer.

Edward Altman's 1968 five-factor distress signal, originally calibrated against US public manufacturers that went bankrupt vs. those that didn't. Above 3.0 is the conventional 'safe' zone, 1.8–3.0 is the grey zone, below 1.8 historically associates with elevated bankruptcy risk within two years. Less reliable for non-manufacturing businesses, financial firms, and asset-light franchises — but the conceptual frame (liquidity + profitability + leverage cushion) translates broadly.

i Measure

Typical range 1.0 to 10.0+

ii Formula

Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.999X5; X1=working_capital/total_assets, X2=retained_earnings/total_assets, X3=ebit/total_assets, X4=market_cap/total_liabilities, X5=revenue/total_assets

working_capital: Current assets minus current liabilities — short-term operating liquidity. $
total_assets: Sum of all assets on the balance sheet at period end. $
retained_earnings: Cumulative net income reinvested in the business rather than paid out as dividends. $
ebit: Earnings Before Interest and Taxes — operating income before financing costs and tax. $
market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $
total_liabilities: Sum of all liabilities on the balance sheet at period end. $
revenue: Top-line sales over the most recent reporting period. $

iii Interpretation

When high Far from distress on Altman's classic formulation — strong combination of liquidity, profitability, and equity cushion against liabilities.
When mid-range Altman Z in the grey zone (1.8–3.0). Not in distress, but not comfortably safe — warrants reading the underlying components individually.
When low Distress zone — tight balance sheet, weak earnings power, or both. Original Altman calibration associates this band with elevated bankruptcy probability over a two-year horizon.

Fundamental metric / Balance Sheet

Quick Ratio

↑ higher is better ratio #quick_ratio

Acid-test liquidity — current assets minus inventory, over current liabilities.

The acid-test variant of current ratio strips inventory from the numerator, since inventory can be stale, obsolete, or written down before it converts to cash. A purer view of near-term liquidity than current ratio. Sweet spot around 1.2x; below 0.5x signals real liquidity stress, above 3x suggests trapped working capital that could be returned to shareholders or reinvested.

i Measure

Typical range 0.5x to 3.0x

ii Formula

Quick Ratio = (current_assets - inventory) / current_liabilities

current_assets: Assets expected to convert to cash within twelve months. $
current_liabilities: Obligations due within twelve months. $

iii Interpretation

When high Quick assets cover near-term obligations comfortably — possibly with excess. Above 3x is high enough to question whether capital is being deployed productively.
When mid-range Liquidity in the healthy range — quick assets roughly match current obligations with a sensible cushion.
When low Quick assets fall short of current liabilities — watch cash-flow timing. Businesses with strong, predictable operating cash can run sub-1.0 indefinitely; businesses with lumpy cash can't.

Fundamental metric / Balance Sheet

Interest Coverage

↑ higher is better x #interest_coverage

Times-interest-earned — how many times EBIT covers the interest bill.

Solvency-under-stress measure. A ratio of 1x means EBIT exactly covers interest with nothing left over for taxes, capex, or principal; 5x is comfortable for an industrial; below 2x is a credit-watch level. Especially important when leverage is rising or profits are cyclical — the ratio should be evaluated at a stress-cycle EBIT, not the current peak.

i Measure

Typical range 1x to 20x+

ii Formula

Interest Coverage = EBIT / interest_expense

interest_expense: Cost of debt service over the period. $

iii Interpretation

When high EBIT covers the interest bill many times over — balance sheet has plenty of breathing room even at trough earnings.
When mid-range Interest coverage in the workable range. Watch the trend through the cycle — coverage is meaningful at trough, not at peak.
When low Operating earnings barely cover interest — stress here turns into solvency risk fast. Refinancing in a higher-rate environment can break this metric overnight.

Fundamental metric / Balance Sheet

Debt-to-Assets

↓ lower is better ratio #debt_to_assets

Leverage measured against the asset base — resilient when equity is small or negative.

Useful complement to debt-to-equity. Banks, REITs, and post-buyback firms can carry small or even negative book equity, which makes D/E unstable; D/A stays well-behaved because total assets is always positive. Industry context still matters — utilities run higher than software by design — but the comparability across capital structures is much better.

i Measure

Typical range 0.0 to 0.7

ii Formula

Debt-to-Assets = total_debt / total_assets

total_debt: Short-term plus long-term interest-bearing debt. $
total_assets: Sum of all assets on the balance sheet at period end. $

iii Interpretation

When high Debt funds a heavy share of the asset base — returns are amplified, so are stress responses. Read alongside coverage and maturity profile.
When mid-range Leverage in the broad-market range. Read alongside interest coverage and refinancing windows.
When low Conservative balance sheet — low solvency risk, possibly under-levered for shareholder returns. Net-cash positions can signal a lack of attractive reinvestment opportunities.

Fundamental metric / Balance Sheet

Net Debt / EBITDA

↓ lower is better x #net_debt_to_ebitda

Standard credit-analysis leverage — years of EBITDA needed to retire net debt.

Bond covenants are commonly written against this ratio because it directly answers 'how many years of operating cash earnings would it take to retire all the debt?' Above ~5x is high-yield territory for industrials; investment-grade industrials typically run below 3x. Negative net debt (more cash than debt) means the firm could pay off its bonds and still hold cash — a common position for mature tech.

i Measure

Typical range 0x to 5x

ii Formula

Net Debt / EBITDA = (total_debt - cash_and_equivalents) / ebitda_ttm

total_debt: Short-term plus long-term interest-bearing debt. $
cash_and_equivalents: Cash plus highly-liquid short-term securities (typically <90 day maturity). $
ebitda_ttm: Trailing-twelve-month EBITDA. $

iii Interpretation

When high Net debt looks heavy relative to operating cash earnings — watch covenant headroom and refinancing windows.
When mid-range Leverage in the workable range for the credit-rating bucket. Most investment-grade industrials cluster between 1x and 3x.
When low Net cash or very low net debt — rating-strong / acquisitive firepower. Common in mature tech and consumer franchises.

Fundamental metric / Efficiency

Inventory Turnover

↑ higher is better x #inventory_turnover

How many times the firm cleared its inventory in the period.

DuPont productivity measure. Combined with margin, it tells the asset-light vs. asset-heavy story: low turnover with high margin is the luxury / branded model, high turnover with thin margin is the supermarket / discount model. Very high turnover in retail can also flag stockouts (lost sales) — the metric reads best industry-relative, not absolute.

i Measure

Typical range 2x to 12x

ii Formula

Inventory Turnover = cogs / average_inventory

cogs: Direct costs of producing the goods or services sold during the period. $
average_inventory: Average of beginning and ending inventory — denominator for inventory turnover. $

iii Interpretation

When high Inventory moves quickly — capital-light operating profile, common in supermarkets, discount retail, and just-in-time manufacturing.
When mid-range Inventory turnover in the broad-market range for the sector.
When low Inventory sits on the shelf — watch for obsolescence write-downs, stale stock, and the working-capital drag that comes from carrying inventory.

Fundamental metric / Efficiency

Days Sales Outstanding

↓ lower is better days #days_sales_outstanding

Average days to collect on credit sales.

How long the average sale sits as a receivable before becoming cash. Earnings-quality flag: receivables growing faster than revenue is one of the cleanest tells for revenue recognition stretching — Beneish flagged exactly this pattern as a primary fraud indicator. Industry context matters: B2B / project businesses run longer DSO than retail, but the trend is more important than the level.

i Measure

Typical range 20 to 90 days

ii Formula

DSO = 365 * average_accounts_receivable / revenue

average_accounts_receivable: Average of beginning and ending accounts receivable. $
revenue: Top-line sales over the most recent reporting period. $

iii Interpretation

When high Receivables sit on the books a long time — revenue may be ahead of cash. Check the trend: rising DSO with flat revenue is an earnings-quality warning.
When mid-range DSO in the broad-market range for B2B firms.
When low Cash collection is fast — high-quality receivables, typical of consumer-facing businesses where most sales are cash or card.

Fundamental metric / Efficiency

Cash Conversion Cycle

↓ lower is better days #cash_conversion_cycle

Days the cash invested in inputs is tied up before customer cash returns.

The single best operations-quality metric. Negative CCC means the firm is funded by suppliers — the customer pays before the supplier needs to be paid (Apple, Costco, Amazon at scale). Long CCC ties up working capital and forces operating-loan dependence. Combines three sub-metrics: days inventory outstanding, days sales outstanding, days payable outstanding.

i Measure

Typical range -30 to +90 days

ii Formula

CCC = DIO + DSO - DPO

iii Interpretation

When high Operations tie up cash for months — working capital is a drag on returns and a vulnerability in a tightening cycle.
When mid-range Standard working-capital cycle for the broad market.
When low Suppliers fund the business — exceptional working-capital position. Negative CCC is the gold standard for operational scale advantage.

Fundamental metric / Income

Earnings Yield

↑ higher is better % #earnings_yield

Inverse of P/E — earnings as a percentage of market cap.

Net income divided by market cap, expressed as a percent. Lets you compare equity earning power directly to bond yields: a 6% earnings yield is the equity-side analog to a 6% coupon, with the difference that earnings can grow (or contract) while a bond coupon is fixed. The standard 'is the equity risk-premium adequate?' framing.

i Measure

Typical range 2% to 15%

ii Formula

Earnings Yield = (net_income_ttm / market_cap) * 100

net_income_ttm: Trailing-twelve-month net income. $
market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $

iii Interpretation

When high Earnings stream is large relative to price — attractive when treasury yields are low and the spread is real. Sustainability depends on whether earnings hold or grow from here.
When mid-range Earnings yield in the broad-market range. Compare to the 10-year treasury — the implied equity risk premium tells you whether the multiple bakes in normal expectations or a stretch.
When low You're earning a small income yield on the cap — the rest of the expected return has to come from growth or multiple expansion. Risk: if growth disappoints, the multiple has nothing else to lean on.

Fundamental metric / Income

Free Cash Flow Yield

↑ higher is better % #fcf_yield

Free cash flow as a percentage of market cap — the cash version of earnings yield.

Free cash flow the business throws off, divided by what the market currently charges for the equity. Treats the equity claim as a perpetual stream of free cash. More honest than earnings yield because it reflects the cash actually available to shareholders after all reinvestment. Cyclicals can swing below zero in a downturn — read with the trailing-cycle range.

i Measure

Typical range 1% to 8%

ii Formula

FCF Yield = (free_cash_flow_ttm / market_cap) * 100

free_cash_flow_ttm: Trailing-twelve-month free cash flow. $
market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $

iii Interpretation

When high Strong cash income relative to price — attractive when growth doesn't have to do all the work and the cash is sustainable through a downturn.
When mid-range FCF yield in the broad-market range. Compare to the 10-year treasury — the implied risk premium tells you whether the multiple is leaning on growth or pricing in a stable, durable cash stream.
When low Most of the expected return must come from growth or multiple expansion, not current cash. Check whether forward FCF expectations justify the gap.

Fundamental metric / Income

Dividend Yield

↑ higher is better % #dividend_yield

Annualised dividend per share, as a percentage of the share price.

Direct cash income from holding the share. Stable dividend yield over time often signals capital discipline and predictable cash generation; abnormally high yield is frequently a warning that the dividend isn't covered by free cash flow and may be cut. Always read alongside payout ratio and FCF coverage.

i Measure

Typical range 0% to 8%

ii Formula

Dividend Yield = (dividends_per_share_ttm / price) * 100

dividends_per_share_ttm: Cash dividends per share over the trailing twelve months. $/share
price: Current share price. $

iii Interpretation

When high Real cash income today — but sustainability depends on payout ratio, FCF coverage, and whether the high yield reflects a falling share price (dividend trap risk) rather than a generous payout.
When mid-range Dividend yield in the broad-market range for income-paying large-caps. Sustainable when payout ratio is moderate and earnings are growing.
When low Most of the expected return must come from price appreciation rather than income. Common for growth stocks that prefer reinvestment or buybacks over dividends.

Fundamental metric / Income

Payout Ratio

↑ higher is better ratio #payout_ratio

Fraction of net income returned to shareholders as dividends.

Sustainability check on the dividend yield. Below 30% means the dividend has substantial room to grow; 30–60% is the conventional sweet spot for a mature payer; above 85% is stretched and frequently precedes a cut. REITs and utilities run higher than the broad market by design — REIT payouts above 80% are normal because the structure requires distributing most income.

i Measure

Typical range 0.0 to 0.85

ii Formula

Payout Ratio = dividends_paid_ttm / net_income_ttm

dividends_paid_ttm: Total cash dividends paid to shareholders over the trailing twelve months. $
net_income_ttm: Trailing-twelve-month net income. $

iii Interpretation

When high Most of net income going out as dividends — little reinvestment cushion. Watch for cuts if earnings dip; a high payout paired with a falling share price often telegraphs the dividend won't survive the next downturn.
When mid-range Payout in the sustainable range — dividend has room to grow with earnings while leaving capital for reinvestment.
When low Dividend is small relative to earnings — capital is being kept inside the business or returned via buybacks. Read with total shareholder yield to see the full cash-return picture.

Fundamental metric / Income

Total Shareholder Yield

↑ higher is better % #total_shareholder_yield

Dividend yield plus net buyback yield.

Captures the full cash return to shareholders — dividends plus share repurchases, expressed as a percentage of market cap. Buyback-heavy issuers (Apple, Alphabet) hide their real cash return behind a low headline dividend yield; total shareholder yield surfaces it. Increasingly the right lens for evaluating capital-return quality, especially for tech-era large-caps that prefer buybacks to dividends.

i Measure

Typical range 1% to 8%

ii Formula

TSY = (dividends_paid_ttm + share_buybacks_ttm) / market_cap * 100

dividends_paid_ttm: Total cash dividends paid to shareholders over the trailing twelve months. $
share_buybacks_ttm: Cash spent on share repurchases over the trailing twelve months. $
market_cap: Total dollar value of all outstanding shares — current share price multiplied by diluted shares outstanding. $

iii Interpretation

When high Heavy cash return through both dividends and buybacks — the franchise is generating more cash than it can productively reinvest, and is returning the surplus.
When mid-range Combined yield in the broad-market range. Sustainable as long as FCF coverage is intact.
When low Little cash going back to shareholders — return depends on growth or multiple expansion. Check whether the cash is reinvesting at high returns (a positive) or sitting idle on the balance sheet.

Fundamental metric / Composite

Piotroski F-Score

↑ higher is better points #piotroski

Nine-question fundamentals checklist — 8 or 9 is strong, 0–2 is weak.

Joseph Piotroski's 2000 score for distinguishing winners from losers among low-P/B value stocks. Asks nine yes/no questions across profitability (4 questions), leverage and liquidity (3 questions), and operating efficiency (2 questions); each 'yes' adds one point. The original study found that high-F-score value stocks meaningfully outperformed low-F-score value stocks, suggesting it's a useful filter for separating real value from value traps. A score is only reported when at least 6 of the 9 criteria can be evaluated — sparse data is treated as no score, not a low score.

i Measure

Typical range 0 to 9

ii Formula

Sum of 9 binary indicators across profitability (ROA>0, CFO>0, ROA improving, CFO>NI), leverage (LT debt/assets falling, current ratio rising, no share issuance), and operating efficiency (gross margin rising, asset turnover rising)

iii Interpretation

When high Clean fundamentals scorecard — profitability, leverage, and efficiency all moving the right way. The classic filter for distinguishing genuine value from value-trap stocks within the cheap-on-multiple universe.
When mid-range F-score in the middle band — some fundamentals improving, others not. Worth dissecting which of the nine criteria failed.
When low Fundamentals deteriorating across the board — a turnaround story or a value trap. Original Piotroski work found that low-F-score names underperform meaningfully.

Fundamental metric / Composite

Sloan Ratio

↑ higher is better ratio #sloan_ratio

Accruals as a fraction of assets — high-magnitude readings are a yellow flag in either direction.

Richard Sloan's 1996 accruals-quality measure. Persistent positive accruals (net income meaningfully exceeds cash flow) tend to mean-revert via earnings disappointments — Sloan documented that high-accruals firms underperform low-accruals firms over the following year. Large negative values are usually fine but can flag one-time working-capital releases or non-cash drags. Scored as a target window centred on zero.

i Measure

Typical range -0.10 to +0.10

ii Formula

Sloan = (net_income_ttm - operating_cash_flow_ttm - cash_flow_from_investing_ttm) / total_assets

net_income_ttm: Trailing-twelve-month net income. $
operating_cash_flow_ttm: Trailing-twelve-month operating cash flow. $
cash_flow_from_investing_ttm: Trailing-twelve-month investing cash flows — typically negative for growing businesses. $
total_assets: Sum of all assets on the balance sheet at period end. $

iii Interpretation

When high Net income outpacing cash by an unusual amount — earnings quality may be deteriorating. Original Sloan research found this band associates with future earnings disappointments.
When mid-range Accruals tracking close to zero — earnings and cash in step. Highest-quality earnings band on Sloan's framework.
When low Cash outpacing net income by an unusual amount — usually a sign of conservatism (heavy non-cash charges) or a one-time working-capital release. Less concerning than high positive Sloan but still worth investigating.

Fundamental metric / Composite

Beneish M-Score

↑ higher is better score #beneish_m

Eight-variable earnings-manipulation detection model.

Beneish (1999) calibrated eight financial-statement indices against a sample of known earnings manipulators vs. matched controls. M < -2.22 reads as 'unlikely manipulator'; M ≥ -1.78 reads as 'likely manipulator'; the gap between is grey. Companion to Altman Z but for fraud risk rather than bankruptcy. Famously flagged Enron prior to the public disclosure of accounting fraud.

i Measure

Typical range -5 to +1

ii Formula

M = -4.84 + 0.92*DSRI + 0.528*GMI + 0.404*AQI + 0.892*SGI + 0.115*DEPI - 0.172*SGAI + 4.679*TATA - 0.327*LVGI

iii Interpretation

When high M-score in the manipulator zone — financial statements show several of Beneish's red-flag patterns at once (rising DSO, deteriorating margins, accelerating accruals). Worth a deep accounting review before trusting reported earnings.
When mid-range M-score in the grey zone — one or two of Beneish's indices are unusual but the combined signal is inconclusive.
When low M-score firmly below the manipulator threshold — none of Beneish's eight red flags are firing meaningfully.

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