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 |
8.52% |
472.35 |
14.72% |
0.63 |
0.16 |
-52.56% |
1.61 |
0.94 |
-0.59 |
1.34 |
0.98 |
-0.06 |
0.00% |
1.00 |
Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 |
10.76% | 7.42% | 8.43% | 9.44% | 8.33% | 9.30% | 9.85% | 10.32% | 10.23% | 8.97% |
784.79 | 360.36 | 462.28 | 584.89 | 451.25 | 566.20 | 641.68 | 712.90 | 699.35 | 524.55 |
20.54% | 18.34% | 19.66% | 18.90% | 17.66% | 17.39% | 17.03% | 17.14% | 16.65% | 17.84% |
0.60 | 0.48 | 0.51 | 0.57 | 0.54 | 0.60 | 0.64 | 0.66 | 0.67 | 0.57 |
0.20 | 0.14 | 0.17 | 0.17 | 0.18 | 0.19 | 0.20 | 0.20 | 0.23 | 0.21 |
-52.63% | -54.55% | -50.75% | -56.48% | -45.99% | -48.74% | -48.81% | -50.34% | -45.17% | -42.02% |
1.68 | 1.50 | 1.55 | 1.61 | 1.54 | 1.61 | 1.64 | 1.68 | 1.70 | 1.55 |
0.98 | 0.73 | 0.78 | 0.89 | 0.83 | 0.93 | 1.02 | 1.04 | 1.06 | 0.91 |
0.20 | -0.38 | -0.29 | -0.11 | -0.23 | -0.19 | -0.05 | -0.18 | -0.11 | 0.02 |
4.91 | 4.82 | 6.64 | 4.22 | 3.04 | 2.42 | 1.91 | 2.65 | 1.84 | 2.28 |
1.28 | 1.18 | 1.04 | 1.12 | 1.04 | 1.25 | 1.18 | 1.15 | 1.18 | 1.19 |
-0.09 | -0.08 | -0.08 | -0.08 | -0.08 | -0.07 | -0.07 | -0.07 | -0.07 | -0.08 |
4.43% | 1.28% | 1.83% | 2.79% | 1.94% | 2.88% | 3.41% | 3.90% | 3.94% | 2.71% |
1.13 | 1.08 | 1.17 | 1.14 | 1.09 | 1.07 | 1.06 | 1.06 | 1.03 | 1.06 |