Operating Rankings

Definition

An Operating Ranking is the tabulation of Operating Ranks of several companies for one time period.

It is admissible to consolidate several Operating Rankings by way of averaging.

Description

Operating Rankings make different businesses directly comparable by indexing operating performance. Indexing measures true operating performance independent of external economic factors, called Operating Alpha, and converts absolute values of value driver performance metrics to percentile rank relative values within each company's own Peer Universe.

Thus with Operating Rankings business in different industries and markets can be compared on the basis of their Operating Alpha created, as measured by its rank. Operating Rankings measure the three main drivers of value: sales growth, profit margins, and asset turns, as well as the combined rank of all three, averaged together.

Application

Operating Rankings are especially useful for strategic capital allocation, portfolio analysis, and M&A decisions; as pre-due diligence for private equity firms; and to audit existing portfolios and evaluate new investments for private investors.

Investors need hard facts for investment strategies and financial models. Thus, the research company Obermatt uses Operating Rankings for the assessment of investment portfolios. The corresponding metrics can be transferred into quantitative investment models.

Examples

The Obermatt Bonus Index of the SMI/SPI, DAX, and other stock markets are real-world examples using the Operating Ranking tool.