QualityNI Gr 1Y#60

Asset Turnover

Year-over-year growth in total net income, before the impact of share count changes. Compare to EPS growth: if net income growth is much lower, share buybacks are driving per-share improvement rather than actual business growth.

Formula

(NI_current - NI_prior) / |NI_prior| x 100

Description

Year-over-year growth in net income before the impact of share buybacks. This complements EPS growth by showing whether earnings improvement comes from actual business growth or from reducing share count. Comparing the two reveals capital allocation strategy.

Interpretation

Above 10% is solid. If NI growth is much lower than EPS growth, buybacks are a major driver. If NI growth exceeds EPS growth, the company may be issuing shares (dilution). Ideally both move in the same positive direction.

Indicator Explained5 min read

Asset Turnover Ratio: Formula and Guide

The asset turnover ratio measures how well a company uses its assets to generate revenue. A higher ratio means the firm gets more sales from each...

Related Quality Indicators

Return on Equity (ROE)Op Margin

The percentage of revenue left after paying all operating expenses but before interest and taxes. This shows how efficiently the core business runs. Above 15% is generally strong. Consistently expanding margins signal improving business quality.

Return on Assets (ROA)Net Margin

The percentage of every revenue dollar that becomes bottom-line profit after all expenses. Above 10% is strong for most industries. Persistently high net margins often indicate a company has a competitive moat protecting its business.

Return on Invested Capital (ROIC)EBITDA Margin

Profitability before the effects of debt, taxes, and depreciation. Useful for comparing companies across different tax jurisdictions and capital structures. Above 20% is generally strong. Often used in merger and acquisition analysis.

Return on Capital Employed (ROCE)FCF Margin

The percentage of revenue that converts to free cash flow. This is arguably the most honest profitability metric because free cash flow is difficult to manipulate. Above 10% is strong. Capital-light businesses like software companies tend to have the highest FCF margins.

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