TL;DR
The quality factor in BIST is defined by high ROE, strong profit margins, and low indebtedness. For instance, ASELSAN's ROE is around 25% while Turkish Airlines' ROE is about 15%.
8 min readThe quality factor is based on the observation that companies with strong financials outperform over the long term. Robert Novy-Marx's 2013 study proved that gross profitability is a powerful predictor of stock returns.
Quality Metrics
Key components of quality: Return on Equity (ROE) — measures capital efficiency, above 15% generally considered good. Net profit margin — how much profit remains from sales. Debt/equity — financial leverage, lower is preferred. Earnings stability — ability to earn consistent profits.
Quality Screening on BIST
Use ROE, net margin, and debt/equity filters in Borsafolio's stock screener for quality screening. Recommended: ROE > 15%, net margin > 10%, debt/equity < 1. Combining with momentum is particularly effective.
Quality + Dividend Combination
Quality filters are critical for avoiding traps in dividend investing. High yield + strong balance sheet creates a sustainable income portfolio. Borsafolio's Dividend + Quality portfolio uses this approach.
Screen BIST stocks by quality metrics.
Open Stock Screener →Related articles: What Is Factor Investing?, Momentum Factor, Value Factor, Low Volatility.
Frequently Asked Questions
What is the quality factor?
The quality factor is a measure used to assess the financial health and sustainability of companies. High ROE, strong margins, and low indebtedness characterize high-quality companies.
How is ROE calculated?
ROE is calculated by dividing net profit by equity. For example, if the net profit is 1 million TL and equity is 5 million TL, ROE would be 20%.
What is margin analysis?
Margin analysis uses indicators like gross margin and operating margin to evaluate a company's profitability. Gross margin is calculated by subtracting costs from sales.
What is the impact of high ROE on investment decisions?
High ROE indicates a company's strong profit potential. For instance, companies like EREGL and TUPRS with high ROE values may attract more investors.
Which companies have a high quality factor?
Companies with a high quality factor in BIST include ASELSAN and Turkish Airlines. These companies are noted for their high ROE and strong financial structures.
This content does not constitute investment advice. Past performance is not a guarantee of future results. Make your investment decisions based on your own risk profile.
