Ratio asset growth to sales

Broker Connectivity
1

Hi Everyone, new user here.
Apologies in advance for the newbie question. I’d like to test lower asset growth relative to sales as a long factor, but I need to avoid negative sales and huge percent changes off of small bases. I am assuming this alone will not work: (lower is better) AstTotGr%3Y/ SalesGr%3Y.

2

If you prefer assets that are shrinking and sales that are growing, then a positive change in asset turnover (sales/assets) would be what you’re looking for. AstTurnGr%3Y (higher better) might do the trick. If not, let me know and I’ll ponder further.

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3

I mainly want to avoid excessive asset growth on its own. Related question - is there a way to rank for organic, not acquired growth when ranking/screening on sales growth?

4

For avoiding asset growth on its own, you could just use AstTotGr%3Y, lower better. For organic sales growth, you might want to use Gr% (SalesA - 3 * Acquis3Yavg, Sales (3, Ann), 3). Of course, that assumes that the price of the acquisition was one years’ worth of sales. Another option would be to screen out companies whose Acquis3YAvg is above a certain percentage of AstTot3YAvg.

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5

Thank you, Yuval.