#### Underlying Calculations

There's a couple of things to keep in mind here. First, wherever you see something like FY, it means "financial year". These are the different timeframes that we use:

FY -2: the financial year before last

FY -1: last financial year

FY0: current financial year

FY1: next financial year

FY2: financial year after the next

FY3: financial year 3 years from now

Whenever you see a number followed by 'D' e.g. 1D, the 'D' stands for days. Whereas 'W' stands for weeks.

Secondly, we always begin by calculating the score of the sub-factors between 0 and 100. Then we take the average of those scores to work out the score of the main factor (Quality, Value or Momentum). The stocks are ranked based on that score from #1 (the highest) to the last (the lowest).

Using Quality as an example, we first calculate each metric that we use for Profitability, score them between 0 and 100, and then calculate the average of all of the scores to get to a score for Profitability. We do the same for the other two sub factors of Quality: Financial Strength and Capital Allocation. Next we average the 3 scores from the sub factors to get to a final score for Quality.

Here is the whole list of the metrics we calculate for each factor.

**Quality: Profitability**

- Return on Equity (ROE), average of FY0, FY-1 and FY-2
- Return on Assets (ROA), average of FY0, FY-1 and FY-2
- Return on Invested Capital (ROIC), average of FY0, FY-1 and FY-2
- Change of ROE, FY0 compared to FY-1
- Change of ROA, FY0 compared to FY-1
- Change of ROIC, FY0 compared to FY-1
- Cash Flow from Operations to Equity ratio, average of FY0, FY-1 and FY-2
- Free Cash Flow to Equity ratio, average of FY0, FY-1 and FY-2

**Quality: Financial Strength**

- For non-financial companies:

Net debt to Equity ratio, average of FY0, FY-1 and FY-2

- For banks:

Non-performing loans to Loan Loss Reserve ratio, average of FY0, FY-1 and FY-2

Tier 1 Capital Ratio, average of FY0, FY-1 and FY-2

**Quality: Capital Allocation**

- Dividend payout ratio, last 12 months
- Change in Dividend per Share, FY0 compared to FY-1
- Change in Shares Outstanding, FY0 compared to FY-1
- Sales to Capital Expenditure ratio, average of FY0, FY-1 and FY-2
- Cash Flow from Operations to Capital Expenditure ratio, average of FY0, FY-1 and FY-2

**Value: Income Statement**

- Price to Earnings, average of FY1, FY2 and FY3
- Price to Sales, average of FY1, FY2 and FY3

**Value: Balance Sheet**

- Price to Book Value, average of FY1, FY2 and FY3

**Value: Cash Flow**

- Free Cash Flow Yield, average of FY1, FY2 and FY3
- Dividend Yield, average of FY1, FY2 and FY3
- Cash Flow from Operations to Enterprise Value, average of FY1, FY2 and FY3

**Momentum: Revenue**

- FY1 revenue revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period
- FY2 revenue revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period

**Momentum: Earnings**

- FY1 earnings per share revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period
- FY2 earnings per share revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period

**Momentum: Sentiment**

- FY1 sell-side analyst rating revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period
- FY2 sell-side analyst rating revisions by sell-side analysts, during the last 1D, 7D, 30D and 90D period

**Historical Growth**

- Revenue growth between FY -2 and FY0
- Earnings per Share growth between FY -2 and FY0
- Dividend per Share growth between FY -2 and FY0
- Free Cash Flow growth between FY -2 and FY0

**Historical Return**

- Share price return for the past 52W, Year to Date and 2 Years to Date

**Share Price Stability**

- Share price volatility for the past 30D, 90D and 200D

**Liquidity**

- Trading value for the past 30D and 52W

**Stock Beta**

- The lowest beta company has a rank of #1

**Return Expectation**

- Target price by sell-side analysts compared to the last close price, measured as a %

**Expected Growth**

- Expected revenue growth by sell-side analysts, FY1 compared to FY0
- Expected earnings per share growth by sell-side analysts, FY1 compared to FY0

**ESG**

- The highest ESG score has a rank of #1

**Accounting Strength: Cash Conversion**

- Cash Flow from Operations to EBITDA ratio, average of FY0, FY-1 and FY-2
- Free Cash Flow to Net Income ratio, average of FY0, FY-1 and FY-2

**Accounting Strength: Working Capital Conditions**

- Working Capital Days, average of FY0, FY-1 and FY-2
- Working Capital Days change, FY0 over FY-1

**Accounting Strength: Interest Coverage**

- EBIT to interest expense ratio, average of FY0, FY-1 and FY-2

**Dividend Yield**

- Dividend per Share of FY0 forecast, compared to the current share price

We will steadily add more factors and perhaps remove some, along the way. What we will always do, is ensure that our underlying calculations are transparent for your scrutiny.