O'Shaughnessy Earnings Quality Formulas?

Research
1

O’Shaughnessy discusses a Earnings Quality Composite Factor that consists.

  1. Current Accruals to Assets
  2. Change in Operating Assets
  3. Total Accruals to Total Assets
  4. Depreciation to CapEx

Has anyone created these four factors for these in P123 and willing to share the syntax for them? I am still new to the data structure so thought I’d start here.

Thanks.

Tom C

2

Tom, there are many possible variations of these factors. Do you have any more details explaining how he calculated them?

Item #4 may be the least ambiguous:
4) Depreciation to CapEx for the Trailing Twelve Months is…
DepSCFTTM/CapExTTM.
This uses depreciation from the Cash Flow statement as opposed to the Income Statement. It also does not include Amortization. However, because some companies reported negative Capital Expenditures (how can that be?) and because negative capital expenditures would yield meaningless results, a more robust formula is:
Eval( CapExTTM>0, DepSCFTTM/CapExTTM, NA )
The Eval function is like the IF() function in Excel.

If you have any more details on how he calculates the other three then please post them and then we can write them up in the P123 syntax. For example, how does he define “Accruals”? How does he define “Operating Assets”?

Chaim

3

Chaim, thanks for your note. Your formula on Item 4 worked well. I think I was able to get what I was after on some of the other items from this previous thread:

http://www.portfolio123.com/mvnforum/viewthread_thread,6086_offset,0

–Tom C