Fundamental Inflection Dupont
In plain terms
Companies where ROE improvement is driven by margin gains (not leverage) outperform peers over the next year.
How it works
DuPont decomposition separates ROE into margin delta, asset turnover, and leverage effects. Positive margin-driven ROE improvement (not leverage-driven) is persistent and predictive. The inflection in margin-contributed profitability is a high-quality fundamental signal.
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
- Reported return
- ~2-4% ann. incremental return
- Tested over
- 1984-2004 (Soliman)
Industry-adjusted DuPont improvement predicts ~2-4% incremental return over 1 year.
Related families
Companies where gross profit is rising while accruals are falling signal improving earnings quality that the market is slow to price.
A rising Piotroski F-Score from a weak starting level signals fundamental recovery before the sell-side catches on.
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