Quantopian's community platform is shutting down. Please read this post for more information and download your code.
Back to Community
At least a data source among fcf, fcf_per_share, and shares_outstanding is wrong
Rein Wu
posted Jan 29, 2020

Hi everyone,

I noticed that the relations between fcf, fcf_per_share and shares_outstanding are incorrect.

Ideally, fcf should equals to fcf_per_share * shares_outstanding. But now if you run the following command: 

class FCF_check(CustomFactor):  
    inputs = [Fundamentals.free_cash_flow, Fundamentals.fcf_per_share, Fundamentals.shares_outstanding]  
    window_length = 1250  
    def compute(self, today, assets, out, fcf, fcf_per_share, shares_outstanding):  
    if fcf[0,-1] != fcf_per_share[0,-1]*shares_outstanding[0,-1]:  
        print("Data error!!!")

It would print "Data error!!!"

Could anyone explain why? Thanks.

2 responses
Dan Whitnable
Jan 29, 2020

The reported values for the individual free_cash_flow and shares_outstanding data (used for calculations) are quarterly while the fcf_per_share ratio is a Trailing Twelve Month (TTM) value. This is the reason why the reported values don't equal the calculated ones. Generally, all the Morningstar data is quarterly, based on the latest 10Q, except for the Valuation Ratios which are TTM values.

To calculate a number which is closer to the reported value one needs to fetch the TTM free_cash_flow and shares_outstanding values. To be correct, one would also need to calculate the weighted average fcf based on the number of common shares outstanding for the period. This value would also need to be adjusted for any corporate actions (eg a stock split).

Attached is a notebook showing a calculated TTM fcf per share. It's generally close, but as highlighted above, without accounting for corporate actions or weighting the fcf values it doesn't entirely match the reported values.

As a technical note, generally one should never expect two floating point numbers to be exactly equal. Even if the reported value for 'fcf per share' would have been a quarterly value, there is a very high probability the following would always be 'Data error'. Because of rounding, the following probably would never be True. The reported values are only significant to 4 decimal places while the calculated values go out many more.

 fcf[0,-1] != fcf_per_share[0,-1]*shares_outstanding[0,-1]

My advice would be to trust the reported Morningstar numbers.

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Rein Wu
Jan 30, 2020

Thank you very much for the detailed explanation, everything get much clearer now!

About Quantopian
Careers
Community
Events
Documentation
Academia
Lectures
Status
Facebook
Twitter
LinkedIn
YouTube
Terms of Use
Privacy Policy

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.