Reply To: What constitutes a quality small cap company?

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#619

Edd

Moderator

Typical quality factors are:

  • High gross margins
  • Low volatility in margins
  • Revenue and earnings growth
  • High and stable ROE and ROIC/ROCE
  • Solid balance sheet (low leverage, net cash position etc)
  • High cash conversion

In a screener I would also include some valuation metrics to allow for multiple expansion.

More information in this discussion note from NBIM: https://www.nbim.no/en/publications/discussion-notes/2015/the-quality-factor/