Gross profitability trend
What it measures¶
Gross profitability is gross profit — revenue minus the direct cost of what was sold — divided by total assets (see Gross profitability). This check compares the latest year's figure with the figure five years earlier and asks: is it higher? The change is shown in percentage points: from 18% to 20% is a rise of 2 percentage points.
Why it is on the page¶
Growth that raises how much gross profit each unit of assets produces is growth the business can build on; growth that lowers it may be bought with price cuts or with assets that earn less. The "Quality minus junk" study counted the five-year change in gross profitability among its measures of a growing, high-quality business. Five years are long enough that one unusual year does not decide it.
Thresholds, their source and the population they were fitted on¶
| Result | When |
|---|---|
| ✓ passed | gross profit ÷ total assets is higher than five years earlier (change above 0) |
| ✕ failed | it is the same or lower |
| ○ not evaluable | the gross profit or total assets of the latest year or of the year five years earlier is not stored |
- Source: Asness, Frazzini and Pedersen, "Quality minus junk" (the growth component).
- Fitted on: listed companies in 24 countries over several decades.
- Evidence grade: peer-reviewed and replicated.
- Basis: own history.
A worked example¶
Honeywell International (statements stored on 25 October 2026): gross profitability was 2.6 percentage points higher in fiscal 2025 than in fiscal 2020 — passed. The Growth tile's reason sentence named it: Gross profitability trend (2.6 pp) meets 5-year Δ > 0, vs its own history.
Apple: the statements stored for it reach back only four years, so the year five years earlier is missing and the check read not evaluable — statements FY2020.
What “No verdict” means here¶
The check needs six fiscal years of statements — the latest and the one five years before it. A company with a shorter stored history cannot run it; the check is not evaluable, the missing year is named, and it leaves the area's count.
What the verdict is and is not¶
A pass says the business produces more gross profit per unit of assets than five years ago. It says nothing about how fast revenue grew, it is not a forecast that the trend continues, and it is not an instruction to trade the shares.