A profitability trend is the evolution of profit within a business. An upward trend means that profit has generally increased over time in the short or long run. A downward profitability trend means profits are declining. Recognizing problems early in profitability trends gives you a better chance to address revenue and cost issues in play.
Profitability refers to a company's relative ability to generate a profit currently and into the future. However, a new business may not have yielded a quarterly profit, but it could have increasing profitability if its profit trend is improving.
On the contrary, an established business may have generated profit in a recent period, while its recent profitability trends call its future viability into question. In the long run, net profitability is vital to achieving for-profit business objectives. However, profit trends are often a strong sign as to big-picture profitability.
The demonstration of Profitability Trend performance shows the comparison of different quantile portfolios. Portfolios were rebalanced monthly using a market-cap weighted method, with 20 bps deducted as costs per transaction.
Annual Return |
Cumulative Return |
Volatility |
Sharpe ratio |
Calmar ratio |
Max Drawdown |
Omega ratio |
Sortino ratio |
Skew |
Kurtosis |
Tail ratio |
Monthly value at risk |
Alpha |
Beta |
SPY |
8.86% |
520.64 |
14.70% |
0.65 |
0.17 |
-52.56% |
1.63 |
0.97 |
-0.60 |
1.34 |
0.98 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
10.89% | 7.49% | 8.53% | 9.46% | 8.49% | 9.25% | 9.90% | 10.40% | 10.42% | 9.16% |
822.17 | 372.58 | 481.29 | 598.69 | 477.10 | 569.83 | 661.68 | 739.04 | 742.11 | 557.99 |
20.48% | 18.29% | 19.61% | 18.83% | 17.62% | 17.33% | 16.97% | 17.08% | 16.60% | 17.78% |
0.61 | 0.49 | 0.52 | 0.58 | 0.55 | 0.60 | 0.64 | 0.67 | 0.68 | 0.58 |
0.21 | 0.14 | 0.17 | 0.17 | 0.18 | 0.19 | 0.20 | 0.21 | 0.23 | 0.22 |
-52.63% | -54.55% | -50.75% | -56.48% | -45.99% | -48.74% | -48.81% | -50.34% | -45.17% | -42.02% |
1.69 | 1.50 | 1.55 | 1.61 | 1.55 | 1.61 | 1.65 | 1.68 | 1.72 | 1.57 |
1.00 | 0.73 | 0.79 | 0.89 | 0.85 | 0.93 | 1.03 | 1.05 | 1.08 | 0.92 |
0.20 | -0.39 | -0.29 | -0.11 | -0.23 | -0.18 | -0.05 | -0.18 | -0.12 | 0.02 |
4.94 | 4.85 | 6.68 | 4.28 | 3.06 | 2.46 | 1.94 | 2.69 | 1.87 | 2.31 |
1.28 | 1.20 | 1.04 | 1.11 | 1.04 | 1.25 | 1.18 | 1.14 | 1.18 | 1.19 |
-0.09 | -0.08 | -0.08 | -0.08 | -0.08 | -0.07 | -0.07 | -0.07 | -0.07 | -0.08 |
4.18% | 1.00% | 1.54% | 2.46% | 1.73% | 2.50% | 3.13% | 3.64% | 3.78% | 2.53% |
1.12 | 1.08 | 1.17 | 1.14 | 1.08 | 1.07 | 1.05 | 1.05 | 1.02 | 1.06 |