With our Xplore Stocks tool, we empower users to create their very own investment strategy and then execute a backtest to see how it would have performed through the last 12 years. We allow users to choose from both fundamental company balance sheet data and as such focus on value and quality. We also provide technical metrics such as momentum, volatility and liquidity. To make it easier to identify what factors you might like to use, we have grouped factors together into overall style factors as follows

1. value
2. quality
3. dividends
4. technical
5. financial

In this post we will go through each metric, inside each of our groups above so users can always know what they are choosing during their investment strategy design.

Xplore contains twelve value type factors for you to choose from.

Free cash flow to equity

The cash a company has at its disposal after accounting for spending on capex and incorporates new debt. It is cash left after accounting for operating expenses and capital expenses. It can then potentially be used to distribute to shareholders, stock buybacks, pay down debt or acquire target companies. It is calculated by

(cash from operations - capex + net debt issued)

Enterprise value to sales

Enterprise value is sometimes used to construct a more accurate value of a company because it takes long and short form debt into account, as well as cash. The EV to sales metric essentially compares the company value to its sales. It is calculated by

(EV/Sales)

Price-to-free cash flow

This metric values a company's share price to its free cash flow, which is a strong way to measure a company. Cash is harder to manipulate than earnings and if a company is generating strong cashflow it is in a strong position. It is calculated by

(Price per share/FCF per share)

EV/EBITDA

The ratio of the enterprise value of a company to its earnings after accounting for interest, tax, depreciation and amortization. It can be especially useful comparing companies within industry segments to spot who is a market leader or laggard. It is calculated by

(EV/EBITDA)

Price-to-earnings

The ratio of the stock price per share to the earnings per share and really represents what price an investor is willing to pay for a stock per unit of earnings. It is calculated by

(Price per share/earnings per share)

Turnover growth

Measures the efficiency or asset turnover. It analyses how effective a company is at using its assets to generate revenue or sales. We use the change in this metric, which is the growth to find companies that are showing improvement in this efficiency metric. It is calculated by

(the change in (sales/assets) since last reported)

Piotroski f-score

A classic value model by Professor Joseph Piotroski that looks at companies from a value perspective by analysing their balance sheets and calculating 9 metrics. The 9 metrics focus on profitability, leverage and operating efficiency with companies receiving either a 0 or 1 per metric. It ranks companies on a scale of 0 to 9, with 0 being least value and 9 being strong value. It is calculated by using

(Net income, ROA, net operating cash flow, cash flow from operations, long-term debt, current ratio change, share issuance, gross margin change, asset turnover change.)

Return on invested capital

A nice metric that calculates the efficiency (or return) on how a company is investing its money. A company that has a history of effectively investing capital to generate a profit is a company that will hopefully reward investors with a return. It is calculated by using net operating profit after tax and invested capital

(NOPAT/Invested capital)

Price-to-sales

Similar to price-to-earnings but this time the price per share is divided by the sales per share and represents how much an investor will pay per unit of sales. It is calculated by

(price per share/sales per share)

Return on average total capital

This measures the ratio of company operating income to its average capital deployed. It is calculated by

(EBIT/Average capital employed)

Price-to-book

A ratio that is classic value and it represents the market value of a company compared to its book value, which is its assets minus liabilities. If the ratio is low or less than 1 then the market is valuing the company at less than its book value which may indicate some value. The underlying ratio is calculated on a per share basis by

(market price per share/book value per share)

EV/EBIT

This is very similar naturally to EVEBITDA but this metric uses just EBIT. It is calculated by

(EV/EBIT)

Xplore has sixteen quality type factors for users to choose from.

Debt-to-equity

If you want to know how much leverage companies use? debt-to-equity is a nice easy way to see this. It is calculated by

(total debt/shareholders equity)

Return on equity

How to know if a company is profitable? The return on equity, which divides the net income of the company by the shareholders equity, is a nice ratio to look at. It is calculated by

(net income/shareholders equity)

Net margin

A very effective metric to look at to see how effectively a company can turn a profit per unit of revenue. It is calculated by

(net income/sales)

Operating cash flow ratio

Want to search for high cash generating companies that can easily service their liabilities? This metric is perfect for that and represents how many times a company can pay back its liabilities in a period by its cash generated during that period. It is calculated by

(cash flow from operations/current liabilities)

Leverage growth

This metric analyses how leverage has changed since a company last reported. Has a company increased its use of leverage ? It is calculated by

(the change in (debt/equity) since company last reported)

Liquidity growth

The change in liquidity of a company since it last reported. Is a company showing an increase in its liquidity ? It is calculated by

(the change in (current assets/current liabilities) since company last reported)

Return on equity volatility

Sometimes knowing how stable a ratio is gives useful information. One way to identify stable high quality companies is to look at the volatility of the return-on-equity for example. It is calculated by

(annualised volatility on quarterly ROE using the last 2 years of company reports)

Current ratio

A nice liquidity ratio that shows if a company can pay short-term obligations. It is calculated by

(current assets/current liabilities)

Quick ratio

Similar to the current ratio but only takes cash into account. It can also be known as the acid test and is calculated by

(cash + equivalents + receivables + short-term securities/ current liabilities)

Cash flow to assets

Another nice efficiency ratio that measures the ratio of actual cash flows to a company's assets. It is calculated by

(cash flow from operations/average total assets)

Gross margin to sales growth

This is the change in the gross margin ratio of a company and clearly a positive change is good. A positive change in a company's margins means they are either utilising their sales more effectively to generate higher profits or they are gaining a competitive advantage compared to their peers in this sector, which is driving higher margins. It is calculated by

(the change in gross margin since company last reported)

Operating margin

Want to know how much profit a company generates compared to its sales, then this is the ideal candidate and represents just that. It shows the margin a company operates under and clearly a highly efficient company will have a nice high operating margin. It is calculated by

(operating income/sales)

Gross profitability to assets

This can be abbreviated to GPA and represents how efficiently a company can generate gross profits from its underlying assets. A company with a high GPA can be seen as potentially having a sustained competitive advantage over their peers. It is calculated by

(gross profit/total assets)

Return on assets

Similar to return-on-equity but this time we scale by assets. It is calculated by

(net income/total assets)

Gross margin

High gross margin is good for a business naturally. It represents sales minus the cost of goods sold. It is calculated by

((sales - cogs)/sales)

Altman z-score

This is a bankruptcy risk metric and is meant to represent the probability of a bankruptcy for a publicly traded company. It uses company information such as profitability, leverage, solvency, liquidity and activity ratios. A score close to 0 indicates a risk of a company going bankrupt and a score 3 or above a company doing good. It is calculated by

(Zscore = 1.2A + 1.4B + 3.3C + 0.6 + 1.0E)

with

A = working capital/total assets, B = retained earnings/total assets, C = EBIT/total assets, D = market cap/total liabilities and E = sales/total assets

Xplore has three dividend type factors for users to choose from.

Dividend payout per share

The classic metric for a dividend hunting investor, the dividend per share. It is calculated by

((total dividends paid - special dividends)/number of shares outstanding)

Dividend yield

The dividends paid are expressed as a percentage of the share price so it represents a yield that the investor is rewarded with for holding the stock. It is calculated by

(dividend per share/price per share)

Payout ratio

Investors sometimes like to compare dividends to earnings and this metric allows just that. It represents the proportion of a company's income (earnings) that it paid out to its shareholders. It is calculated by

(dividend per share/earnings per share)

Xplore has 8 technical type factors for users to choose from.

Momentum

Momentum is constructed by calculating the total return of the stock using a fixed historical window. We allow users to choose from 3 month, 6 month and 1 year momentum.

Volatility

All else being equal, most users would prefer a less volatile stock than one with higher volatility. We provide users with the ability to rank and filter their investing strategies using this volatility calculation. Users can choose from 3-month, 1 year and a longer 3 year volatility.

Liquidity

This is the liquidity ranking of a stock compared to its peers. The more liquid a stock the better as it usually means that the transaction costs and bid-offer spread are lower. We rank stocks close to zero for least liquid and 1 for most liquid.

These metrics are used mostly for groups with financial exposure and they contain interest income and deposit information.

Xplore has 4 financial type factors for users to choose from.

Debt to market cap ratio

How much debt a company has compared to its market cap. It is calculated by

(total debt/total market cap)

Deposits to assets ratio

This provides a measure of how large a deposit base an institution has compared to its total assets. It is calculated by

(total deposits/total assets)

Interest income to revenue ratio

This represents what ratio of a company's gross income is made up of interest income. It is calculated by

(interest income/gross income)