METRIC FIT · EARNINGS
Earnings
How much it keeps
how much of its revenue a company keeps as profit, and whether that profit is growing
My weights and the Jupick grade weights
Earnings
Financial health
Dividends
Valuation
Answer the questions and the weights you set will appear here.
What it means
People who put this axis first see a company as "a machine that makes money". With the same revenue, some companies keep a large profit and some keep almost nothing, and this view holds that the gap widens over time.
The strength of this view is that it is closest to what a company actually does. The debt-to-equity ratio and dividends are both questions of how a company handles the profit it earns, and without profit the rest does not hold. That is why the earnings axis tends to stand ahead of the other axes.
Margins, though, are largely set by the industry. A retailer’s 3% and a software company’s 30% cannot be compared on the same yardstick, and putting this axis first can drop whole industries with structurally low margins out of view.
How it shows up
- Reading a company profile, you look for "how much of it ends up as profit" before "what it does"
- You react more to a margin holding up than to news that revenue grew
- You drop loss-making companies from the list before looking at other metrics
This axis’s weight in the Jupick grade
40%Share of the 100-point overall grade that this axis makes up
This is the axis with the largest weight in the Jupick grade. It is broadly fair to say that highly graded stocks earned their points mostly on this axis.
What this axis does not tell you
A high margin now does not mean the margin will last. All three metrics on this axis are results of periods already past.
Profit can look different depending on accounting treatment. When one-off gains are mixed in, that year’s ROE comes out higher than the real business ability.
A company that pushed up ROE with a lot of debt and one that achieved the same ROE without debt look the same on this axis. The financial health axis sees that difference.
Metrics that measure this axis
- ROEKorean 7.5% · US 18.4%Return on equity. How much profit the company made in a year with the money shareholders put in (equity).
- Operating marginKorean 7.4% · US 23.5%The share of sales left as operating income from the core business, showing how profitable that business is.
- Revenue growthKorean 7.5% · US 10.4%How much sales grew compared with a year earlier, the pace of the company's top-line growth.
The middle value is the one that sits at the exact center when the stocks Jupick covers are lined up by size, recounted once a day. Stocks with fill-in values are left out, so the value is empty when the sample is too small.
What the other three axes look at
This assessment is reference content that describes ways of reading metrics. It is not a suggestion to trade any stock or product and not investment advice. Investment decisions and their responsibility rest with you.