What is NOPLAT? NOPLAT stands for Net Operating Profit Less Adjusted Taxes. It represents a company’s operating profit after adjusting to normalize for the impact of capital structure and deferred taxes. The NOPLAT metric represents the earnings generated by a company after subtracting income taxes related to core operations and adding back overpaid taxes over…
What is Asset Stripping? Asset stripping refers to the process of purchasing an undervalued company and then separately selling its assets. The premise of asset stripping is to sell the individual assets of the acquired company at an aggregate higher price than selling the whole company by itself. How It Works Asset stripping…
What is the Portfolio Turnover Ratio? The portfolio turnover ratio is the rate of which assets in a fund are bought and sold by the portfolio managers. In other words, the portfolio turnover ratio refers to the percentage change of the assets in a fund over a one-year period. Formula for the Portfolio Turnover Ratio…
What is a Cyclical Industry? A cyclical industry refers to an industry whose revenue generation capabilities are tied to the business cycle. In other words, a cyclical industry is an industry whose performance is correlated to the business cycle. Understanding the Business Cycle To understand a cyclical industry, an understanding of the business cycle is…
What is a Corporate Raider? A corporate raider is an individual or a party that purchases a substantial position (enough to gain a controlling position) in a company that is deemed undervalued. In other words, a corporate raider is an individual that takes control (commonly through a hostile takeover) of an undervalued company. …
What is the CAPEX to Operating Cash Ratio? The CAPEX to Operating Cash Ratio assesses how much of a company’s cash flow from operations is being devoted to capital expenditure. Such investments entail engaging in capital-intensive projects such as expanding a production facility, launching a new product line, or restructuring a division. The CAPEX to Operating…
What is the Operating Cash to Total Cash Ratio? The Operating Cash to Total Cash Ratio measures how much of a business’ generated cash flow comes from its core operations. This can be used as an indicator of how well a business can sustain its current cash management strategy in the long term. A business that…
What is the Times Interest Earned Ratio? The Times Interest Earned (TIE) ratio measures a company’s ability to meet its debt obligations on a periodic basis. This ratio can be calculated by dividing a company’s EBIT by its periodic interest expense. The ratio shows the number of times that a company could, theoretically, pay its…
What is Return on Total Capital (ROTC)? Return on Total Capital (ROTC) is a return on investment ratio that quantifies how much return a company has generated through the use of its capital structure. The ROTC ratio is different from return on common equity (ROCE), as the former quantifies the return a company has made…
