Price & Market BehaviorCore researchlive in production

Cash Profitability

Updated dailyData needs: mediumlong onlyshort onlylong short

In plain terms

Cash operating profit (backs out accrual fudges) over book equity is a sharper quality predictor than gross profit. Long the cash-rich.

How it works

Distinct from QMJ's "profitability" leg: cash-based operating profit (operating income + depreciation − ΔAR − ΔInventory + ΔAP) / book equity is a stronger single-name predictor than Novy-Marx's gross profitability or GAAP operating profitability. The intuition: cash-OP backs out accruals that the market discounts (or that fade) — what's left is the cash component of operating profit, which earnings persistence work shows is most repeatable.

Live results

5 times picked on its own · 10 times inside a blend (9 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 10 such blended picks (9 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Fundamentals
Quarterly fundamentals (income, balance, cash-flow) from FMP + SEC.

Expected edge

Tested over: 1963-2014 (Ball-Gerakos-Linnainmaa-Nikolaev)

See the source research for the original effect size; a modern replication on new data may be weaker.

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