Our latest quantitative tool to address earnings quality-related risks is our Earnings Quality Rank℠ (EQR℠), a innovative product that draws from Gradient's qualitative research and Sabrient's quantitative methodology to create a new hybrid methodology.
EQR offer clients an objective and unbiased assessment of a company’s relative potential risk due to accrual accounting practices, as reflected in key relationships between information contained in the firm’s income statement, balance sheet, and cash flow statement. This product represents the next step in quantitatively assessing earnings quality and accounting related risks.
EQR covers approximately 3,000 US-listed stocks with a market capitalization greater than $150 million and a share price greater than $2. These constraints are applied to focus EQR on those companies that are of highest interest to clients and prospects. The variables used to construct EQR include evolved calculations of accruals and other unique earnings quality risk assessment factors developed by Gradient Analytics. Moreover, EQR features assessments of earnings quality of companies within the financial industry, which often is not offered by competing solutions.
EQR may be deployed in a variety of environments to detect potential accounting-related tail-risks.