G-Score - US

Approach

For the G-Score, firms with stronger growth fundamentals have better future realizations of earnings and are less likely to delist for reasons related to poor performance. Strong firms are more likely to beat the earnings forecast and earn positive abnormal returns around future earnings announcements.

Factors Evaluated

The G-Score consists of three sub-group of ratios. These are:

1. Earnings and Cash Flow Profitability

ROA1: Return on Assets

ROA2: Return on Assets with cash from operation (versus income)

The relationship between a firm's cash flow from operations and net income.

2. Earning and Growth Stability

The variance of a firm's Return on Assets in the past five years, compared with the industrial mean.

The relationship between a firm's sale growth variability and the current industry mean.

3. Accounting Conservatism

Actions that may depress current earnings and book values, but may boost future growth.

Methodology

From the universe of the entire US equities, G-Score is calculated for each equity, followed by ranking equities from the highest to the lowest G-Score; the ranking is normalized with Z-Score function.

Portfolio showcase is created by dividing the universe into 7 parts basing on stocks’ G-Score value, with the G6 representing the stocks with G-Score equal to 6 and the bottom G0 representing the stocks with G-Score equal to 0.

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