Glossary | The Q Factor

P/E Ratio (Price-to-Earnings)

How much investors pay for each dollar of earnings. Lower generally means better value.

< 15: Undervalued

15-25: Fair value

> 25: Expensive

ROE (Return on Equity)

How efficiently the company uses shareholder money to generate profits.

> 15%: Excellent

5-15%: Average

< 5%: Weak

Debt/Equity Ratio

How much debt the company has relative to shareholder equity. Lower is safer.

< 100: Conservative

100-200: Moderate

> 200: High leverage

Revenue Growth (YoY)

Year-over-year change in revenue. Shows if the business is growing or shrinking.

> 10%: Strong growth

0-10%: Stable

< 0%: Declining

Z-Score (Altman)

Bankruptcy risk indicator combining multiple financial ratios.

> 2.99: Safe zone

1.81-2.99: Grey zone

< 1.81: Distress zone

ICR (Interest Coverage Ratio)

Can the company pay its interest? EBIT divided by Interest Expense. Used for REITs, utilities, and financial companies where Z-Score is not applicable.

> 4.0x: Excellent coverage

1.5-4.0x: Adequate

< 1.5x: Risk - struggling to cover interest

Operating Margin

Profit from core operations as a percentage of revenue. Shows operational efficiency.

> 15%: Excellent

5-15%: Average

< 5%: Thin margins

Current Ratio

Can the company pay short-term bills? Current assets divided by current liabilities.

> 2.0: Healthy

1.0-2.0: Adequate

< 1.0: Liquidity risk

Q Factor Insight: Numbers tell part of the story. Our qualitative analysis reads annual reports to understand why these numbers look the way they do — and what management plans to do about them.