Our goal is to help you build the best strategies possible. In an effort to help, we've produced a curated library of fundamental factors developed and published by our lead data scientist, Max Margenot. As new factors are developed, they will be added here by someone on our team.
How To Use
We suggest working, researching, and experimenting with these factors within your existing strategies or building entirely new strategies with them to help your edge in the daily contest.
For any questions and further areas of research, comment down below.
Fundamental Factor Library
Free Cash Flow to Enterprise Value - Free cash flow (FCF) is a measure of how much cash a company has on hand after all expenses are extracted. High FCF indicates that larger amounts of cash are available to the company for reinvestment. By dividing by a company’s enterprise value (EV), we can compute a ratio that shows how cash is generated per unit of the value of a company. In this implementation, we can test the idea that companies with a relatively higher ratio of FCF/EV are likely to outperform companies with relatively lower levels of FCF/EV.
Debt to Total Assets - The ratio of a company’s debt to its total assets is a measure of the amount of leverage taken on by a company. Higher values (above 1) indicate that a company has more liabilities than assets (aka you owe more than you own), while lower values (below 1) indicate that a company has more equity than debt. In this template, we’ve taken advantage of this measure to test the idea that companies with relatively lower levels of Debt to Total Assets are likely to outperform companies with relatively higher levels of Debt to Total Assets
Capital Expenditure Volatility - Cash flow volatility is a fairly well studied metric that is often considered a proxy for uncertainty at a firm level. In this template algorithm we've extended that idea to see if firms with relatively more volatile capital expenditures (e.g. spending on things like new buildings, plants, equipment, etc) are also more unpredictable and, by extension, riskier and more likely to underperform firms with lower relative capex volatility.
Sales Size - This is a valuation metric. We expect companies that generate more revenue per dollar of market cap to generate outsized returns compared to a company of comparable size that generates less revenue. Our factor is calculated as the sale of revenue from goods and services over the last twelve months divided by market cap. We would naturally expect larger companies to generate more raw sales revenue than smaller companies, so we try to remove that from the equation and get at pure value.
Feedback or Questions?
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