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Economic Profit (Fixed & Labeled) — Rated + Peers

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FRAC (Fundamental-Rated-Asset-Calculate)

FRAC is a fundamentals-driven tool designed to measure whether a company is creating or destroying shareholder value. Unlike surface ratios, FRAC uses Economic Profit (ROIC – WACC) as its engine, showing whether a business truly outperforms its cost of capital.

🔹 What FRAC Does

Calculates ROIC (Return on Invested Capital) vs. WACC (Weighted Average Cost of Capital).

Shows whether a company is creating or destroying shareholder value.

Uses tiered color coding for clarity:

🔵 Superior (Aqua Blue) → Top tier; best of the best.

🟣 Elite (Purple) → Strong value creation.

🟢 Positive (Green) → Solid, creating shareholder value.

🟡 Marginal (Yellow) → Barely covering cost of capital.

🔴 Negative (Red) → Value destruction.

🔹 Composite Ranking System (1–4)

FRAC also assigns each company a Composite Rank so you can compare multiple names side by side. The rank works like this:

Rank 1 → Superior (🔵 Aqua Blue)

Best possible rating; wide gap between ROIC and WACC.

Rank 2 → Elite (🟣 Purple)

Strongly positive; above-average capital efficiency.

Rank 3 → Positive (🟢 Green)

Creating value but only moderately; not a top compounder.

Rank 4 → Marginal/Negative (🟡/🔴)

Weak or destructive; either barely covering WACC or losing money on capital.

✅ How to Use the Ranks

When comparing a set of peers (e.g., NVDA, AMD, INTC):

FRAC will display each company’s color rating + composite rank (1–4).

You can instantly see who is strongest vs. weakest in the group.

Best decisions = overweight Rank 1 & 2 companies, avoid Rank 4 names.

🔹 Key Inputs Explained

Risk-Free Asset → Typically the 10-Year US Treasury yield (US10Y).

Corporate Tax Rate → Effective tax rate for the company’s country (e.g., USCTR).

Expected Market Return → Historical average ~8–10%, adjustable.

Beta Lookback Period → Controls how far back Beta is calculated (longer = more stable, shorter = more reactive).

👉 These must be set correctly for FRAC to calculate WACC accurately.

🔹 Example Comparison

NVDA: ROIC 25% – WACC 7% = +18% → 🔵 Superior → Rank 1

AMD: ROIC 17% – WACC 8% = +9% → 🟣 Elite → Rank 2

INTC: ROIC 11% – WACC 9% = +2% → 🟢 Positive → Rank 3

FSLY: ROIC 5% – WACC 10% = –5% → 🔴 Negative → Rank 4

🔹 Why It Matters

Buffett said: “The best businesses are those that can consistently generate returns on capital above their cost of capital.”
FRAC turns that into a visual + numeric rating system (1–4), making comparisons across peers simple and actionable.

🔹 Credit

FRAC was created by Hunter Hammond (Elite x FineFir), inspired by corporate finance models of Economic Profit and Economic Value Added (EVA).



⚠️ Disclaimer: FRAC is a research framework, not financial advice. Always pair with full due diligence.

Feragatname

Bilgiler ve yayınlar, TradingView tarafından sağlanan veya onaylanan finansal, yatırım, işlem veya diğer türden tavsiye veya tavsiyeler anlamına gelmez ve teşkil etmez. Kullanım Şartları'nda daha fazlasını okuyun.