MARCH 2020
MARCH 2020
Information Classification: GENERAL
MSCI Fundamental
Data Methodology
MSCI Methodology for Fundamental Data
March 2020
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Introduction ................................................................................... 6
1 Fundamental Per Share Data ............................................... 10
1.1 General Rules .................................................................................... 10
1.1.1 Number of shares .................................................................................. 10
1.1.2 Consolidation ......................................................................................... 11
1.1.3 Currency and Frequency ....................................................................... 11
1.1.4 Accounting Standards Used ................................................................. 11
1.1.5 Sources and Updates ............................................................................ 11
1.2 Historical Per Share Data Calculations ........................................... 12
1.2.1 Sales Per Share (SPS) ........................................................................... 13
1.2.2 Earnings Per Share (EPS) ...................................................................... 13
1.2.3 Cash Earnings Per Share (CEPS) .......................................................... 14
1.2.4 Dividends Per Share (DPS).................................................................... 14
1.2.5 Book Value Per Share (BVPS) ............................................................... 15
1.3 Forecasted Per Share Data .............................................................. 16
2 Security Ratios ...................................................................... 19
2.1 Valuation Ratios ................................................................................ 19
2.2 Other Financial Ratios ...................................................................... 19
2.2.1 Long-term Historical Growth Trends .................................................... 19
2.2.2 Return on Equity (ROE) .......................................................................... 21
2.2.3 Payout Ratio ........................................................................................... 21
2.2.4 Current Internal Growth Rate (g) .......................................................... 22
2.2.5 Short-term Forward Earnings Per Share Growth Rate (EGRSF) ......... 22
2.2.6 Long-term Forward Earnings Per Share Growth Rate (EGRLF) .......... 22
2.2.7 Earnings Variability (EVAR) ................................................................... 22
2.2.8 Enterprise Value to Cash Value (EV/CFO) ........................................... 23
CONTENTS
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2.2.9 Debt Reduction Yield (DRY/LDRY) ........................................................ 24
2.2.10 Debt to Equity (D/E) ............................................................................... 25
2.2.11 5 Year DPS Growth Rate (5Y DPS G) .................................................... 26
2.2.12 1 year DPS Growth Rate (1Y DPS G) .................................................... 27
2.2.13 Cash ROA (CROA) .................................................................................. 28
2.2.14 3 Year Average Earnings ....................................................................... 29
2.2.15 3 Year Average Cash Earnings ............................................................. 30
2.2.16 3 Year Average Sales ............................................................................ 31
2.2.17 Cash Flow Dividend Coverage Ratio .................................................... 31
2.2.18 Dividend Coverage Ratio ....................................................................... 32
2.2.19 Cash flow by total Capital ..................................................................... 32
2.2.20 Return on Assets (ROA) ........................................................................ 33
2.2.21 Capital Expenditure to Sales (CAPEX/SALES)..................................... 34
2.2.22 Buyback Yield ........................................................................................ 35
2.2.23 Total Yield .............................................................................................. 35
2.2.24 Reinvestment rate ................................................................................. 35
2.2.25 Accruals Cash Flow ............................................................................... 36
2.2.26 Accruals Balance Sheet ........................................................................ 37
2.2.27 Net Income to Issuer Market capitalization ........................................ 37
2.2.28 Cash Earnings to Issuer Market Capitalization ................................... 38
2.2.29 Book Value to Issuer Market Capitalization ........................................ 38
2.2.30 Research and development to sales (R&D/Sales) .............................. 39
2.2.31 Asset Turnover (ATO) ........................................................................... 40
2.2.32 Gross Profitability (GP) ......................................................................... 40
2.2.33 Gross Margin (GM) ................................................................................ 41
2.2.34 Cash Earnings to Earnings (CETOE)..................................................... 42
2.2.35 Free Cash Flow To Sales (FCF/Sales) .................................................. 42
2.2.36 Free Cash Flow to Net Income (FCF/Net Income) .............................. 43
2.2.37 Earnings Before Interest and Taxes to Enterprise value (EBIT/EV) ... 44
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2.2.38 Earnings Before Interest and Taxes To Total Assets (EBIT/Total
Assets) ................................................................................................... 45
2.2.39 Absolute Growth Rates ......................................................................... 45
2.2.40 Working Capital To Total Assets .......................................................... 46
2.2.41 Issuer Market Capitalitalization To Total Liabilities ............................ 47
2.2.42 Retained Earnings To Total Assets ...................................................... 47
3 Index Ratio ............................................................................ 49
3.1 Index Valuation Ratios...................................................................... 49
3.2 Other Index Financial Ratios ............................................................ 50
3.2.1 Return on Equity (ROE) .......................................................................... 50
3.2.2 Payout Ratio ........................................................................................... 50
3.2.3 Current Internal Growth Rate (g) .......................................................... 50
3.2.4 Short-term Forward EPS Growth Rate (EGRSF) ................................... 51
3.2.5 Long-term Growth Rates/Trends .......................................................... 51
3.2.6 12-Month Index EPS .............................................................................. 51
3.2.7 Year on Year Growth EPS ...................................................................... 52
3.2.8 Estimated Daily Dividend Yield ............................................................. 52
4 Fundamental Data Treatments for Corporate Events ........ 54
4.1 Nominal Changes in Capital Structure ............................................ 54
4.2 Real Changes in Capital Structure ................................................... 55
4.3 Both Nominal and Real Changes in Capital Structure ................... 56
4.4 Changes in Business Structure........................................................ 56
5 Balance Sheet Information .................................................. 58
6 Hyperinflationary economies – Adjustment of Fundamental
Data ....................................................................................... 60
Appendix I: MSCI’s treatment of some specific aspects of IFRS
............................................................................................... 61
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Appendix II: Index Ratio Calculation Examples ......................... 63
Appendix III: Correction Policy ................................................... 68
Methodology Book Tracked Changes ........................................ 69
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INTRODUCTION
MSCI began publishing annual fundamental data for developed market companies in
1969 and for emerging market companies in 1988. MSCI has accumulated a large
volume of historical fundamental data during this period.
Fundamental Data
Security Level Ratios
Historical Coverage
Earnings per share
Price to Earnings
Return on Equity
Since December 1969 for DM
Since January 1992 for EM
Since March 1997 for DM
Since December 1993 for EM
Cash Earnings per share
Price to Cash Earnings
Since January 1970 for DM
Since January 1992 for EM
Sales per share
Price to Sales
Since January 1992 for EM
countries
Since January 2001 for DM
countries
Book Value per share
Price to Book Value
Since December 1974 for DM
Since January 1992 for EM
Dividends per share
Dividend Yield
Since December 1969 for DM
Since January 1992 for EM
5-years Sales, earnings, cash-
earnings, earnings per share
Since December 1969
5 year SPS growth trend , 5 year
EPS growth trends
Since June 2003
Balance sheet items
Since March 1971 for DM
MSCI uses these fundamental data items to define:
• Fundamental per share data
• Security ratios
• Index ratios
• Balance Sheet information
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In addition, MSCI uses fundamental data to calculate the variables used to assign
style to securities under its Value and Growth methodology. The following table
summarizes the key variables calculated by MSCI using fundamental data:
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Table #1
Fundamental Data Calculation Summary
Fundamental Per Share Data
Security Level Ratios
Index Level Ratios
Sales Per Share
Price to Sales
Long-term Historical Sales
Per Share Growth Trend
Long-term Historical Sales Per
Share Growth Trend
Earnings Per Share
Price to Earnings
Price to Earnings
Long-term Historical
Earnings Per Share Growth
Trend
Long-term Historical Earnings Per
Share Growth Trend
Return on Equity
Return on Equity
Current Internal Growth Rate
Current Internal Growth Rate
12 Months Trailing Index EPS
Year on Year Growth Trailing EPS
Cash Earnings Per Share
Price to Cash Earnings
Price to Cash Earnings
Dividends Per Share
Dividend Yield
Dividend Yield
Payout Ratio
Payout Ratio
Book Value Per Share
Price to Book Value
Price to Book Value
Forecasted Earnings Per Share
Price to Earnings Forward
Price to Earnings Backward
Long-term Forward Earnings Per
Share Growth Rate
Short-term Forward Earnings Per
Share Growth Rate
12 Months Forward Index EPS
Year on Year Growth Forward EPS
For certain corporate events MSCI may also adjust and/or restate fundamental data
and related ratios in order to maintain comparability between historical and future
data. These adjustments are made based on the timing of the event and availability
of information at the time of the event.
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Depending on the MSCI Equity Index Series or the Global Equity Model, MSCI will
provide different fundamental data for each product on a monthly basis. Per share
data and security ratios (price to sales, price to earnings, return on equity, price to
cash earnings, price to book value, dividend yield) are provided for all MSCI Equity
Index Series and Global Equity Models. Fundamental data used for style attribution is
distributed for the MSCI Value and Growth Indexes and the Global Equity Models.
This data includes long-term historical growth trends, current internal growth rate,
and forecasted earnings figures.
MSCI strives to maintain clear and transparent rules that best reflect the accounting
standards of each country in a consistent manner. The information provided in this
methodology book relates to all equity index products distributed by MSCI that use
fundamental data. The book demonstrates MSCI’s use of fundamental data to
calculate financial ratios and indicators at both the security and index level.
Additionally, this book demonstrates how MSCI uses fundamental data in connection
with corporate events.
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1 FUNDAMENTAL PER SHARE DATA
MSCI provides per share data on an annualized basis and calculates the data on a
company level in which all classes (listed and unlisted) of equity are aggregated. The
total shares outstanding for the latest period is used for per share data calculations.
MSCI provides two types of fundamental per share data:
• Historical
• Forecasted
Using historical and forecasted data, MSCI calculates security and index ratios. The
following section details how MSCI gathers and calculates all fundamental per share
data.
1.1 GENERAL RULES
1.1.1 NUMBER OF SHARES
To calculate per share figures, MSCI uses the total number of shares at the company
level at the date of the results.
All of the company’s share classes, listed and unlisted, are aggregated in the total
number of shares regardless of whether they are included in an index, as long as they
exhibit characteristics of equity securities and are eligible for the MSCI universe. If
preferred shares exhibit equity-like characteristics, they are included in the number of
shares for per share calculation
MSCI always excludes stock options, warrants and convertible securities from the
number of shares outstanding. In other words, diluted number of shares is not used.
In general, treasury shares are systematically excluded from index level calculations
and from number of shares used for per share calculations.
Total number of shares at the company level at the date of the results is used to
calculate per share figures, except United States of America, Canada, the United
Kingdom and Ireland where average number of shares is used for per share
calculations of earnings, cash earnings, and sales as is the standard practice in
these countries.
For companies where MSCI tracks their Depository Receipts (ADR, GDR) or
Certificates of Participation (CPO), MSCI reports the fundamental per-share variables
on a ‘per-ADR / GDR’ or ‘per-CPO’ basis.
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1.1.2 CONSOLIDATION
MSCI always calculates fundamental data using consolidated information unless
consolidated results are unavailable or are not reported on a regular basis. However,
in countries like India, owing to the disclosure procedures, there could be use of
unconsolidated data for interim financial results whereas the fiscal period financial
results could be consolidated.
1.1.3 CURRENCY AND FREQUENCY
MSCI reports fundamental data in the currency of a company’s country of
classification based on GIMI Methodology. In general, MSCI follows the frequency of
the company reporting. For example, if companies report quarterly results, MSCI
also follows quarterly results.
1.1.4 ACCOUNTING STANDARDS USED
The primary accounting standard followed by MSCI is the local GAAP. If the company
does not report in local GAAP but reports in other GAAPs, such as IAS or US GAAP,
then MSCI will follow the latter. For a large number of European countries and some
other countries in the Asia-Pacific, MSCI started following IFRS accounting in the
year 2006 (please refer to Appendix I for details on MSCI’s treatment of some
specific issues related to IFRS).
1.1.5 SOURCES AND UPDATES
MSCI sources company information from third party vendors as well as from publicly
available information made available by the companies. In addition, MSCI reflects
publicly available information once it is available in the market, provided that the
information is complete. We commonly obtain information in the form of vendor
files, press releases, interim and annual reports. MSCI uses both audited and
unaudited reports.
MSCI endeavors to ensure correctness, quality and timeliness of data loaded into its
database, by employing quality control procedures like updating company
information only upon availability of complete information, such as official filings
with stock exchanges or regulators or upon dual vendor validation. Emphasis is
placed on updating the results of bigger companies first, but without undue delay for
updating the results for all companies.
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1.2 HISTORICAL PER SHARE DATA CALCULATIONS
1
The following are the historical per share figures that are reported and/or used by
MSCI:
• Sales per share (SPS)
• Earnings per share (EPS)
• Cash earnings per share (CEPS)
• Dividends per share (DPS)
• Book value per share (BVPS)
In general, historical per share figures are calculated using the following formula:
For instance, if the last period for which results are reported is for an interim period
of 3 months ended Mar 31, 2011, the trailing 12-month Earnings will be calculated as:
Trailing 12-month earnings = Fiscal period earnings for the year ended Dec 31, 2010 +
(3 month earnings for the current interim period ended Mar 31, 2011 – 3 month
earnings for the comparative interim period ended Mar 31, 2010)
The following are exceptions:
• Dividends per share are always used on a per share basis as provided by the
company for all calculations.
• Book value per share is calculated using the latest reported book value; a trailing
12-month figure is not calculated.
MSCI calculates security per share and ratios if the gap between calculation date and
financial reporting period end date is less than 18 months. For example, per share
1
MSCI will update Fundamental per share data for China A "Stock Connect" listings based on the offshore RMB
exchange rate (CNH). In addition, for securities listed outside China and reporting their financials in RMB, MSCI
will publish fundamental per share data based on CNH effective March 2018 month-end.
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and ratios will not be calculated for a security reporting fundamental data as of
period ended December 31, 2017 for June 30, 2019 calculation date.
The following section defines the general rules for historical per share figures and
their use.
1.2.1 SALES PER SHARE (SPS)
MSCI defines sales for all issuers as net operating revenues from all on-going lines
of business of the company.
Due to the different definitions of sales in different industries, MSCI applies certain
exceptional treatment in sales reported for some companies:
• For Banks (GICS® Industry Group 4010), MSCI does not publish sales.
• For Insurance companies (GICS® Industry Group 4030), MSCI uses the net
premiums earned (or net premiums written, if the former is not available) as a
proxy for sales.
• For certain companies that report higher revenues on account of notional
contracts or sales, MSCI may report revenues net of operating cost.
MSCI follows cumulative sales reported by the companies, instead of quarterly sales
figures. In addition, excise tax is always deducted from sales whenever this
information is available.
MSCI uses sales for two purposes:
• Price/Sales, which is calculated using the trailing 12-month sales per share
figure; and
• Long-term Historical SPS growth trend, which is calculated using the last five
years fiscal year-end sales per share.
1.2.2 EARNINGS PER SHARE (EPS)
MSCI defines earnings as the net income from the continuing operations available to
all equity shareholders (i.e., all shareholders holding securities that exhibit equity-like
characteristics), excluding extraordinary items or non-recurring items, minority
interest and preferred dividends (in cases where preferred shares do not exhibit
equity like characteristics).
In cases where MSCI determines that a company has unusual gains or losses that do
not reflect the earnings potential of the company going forward, the item will be
treated as non-recurring and will be excluded from earnings on an after-tax basis.
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Profit / loss on sale of discontinued operations, restructuring charges, bankruptcy
charges, changes in accounting policy etc. could be some instances where the
profits / losses are adjusted by MSCI to reflect normalized earnings.
For all countries, the EPS is calculated using net earnings and number of shares,
except in the US, Canada, the UK, and Ireland where MSCI follows basic (undiluted)
EPS from continuing operations available to common shareholders as reported by
companies.
MSCI uses earnings per share for four purposes:
• Price/Earnings, which is calculated using the trailing 12-month earnings per share
figure;
• Long-term Historical EPS growth trend, which is calculated using the last five
years fiscal year-end earnings per share;
• Return on Equity (ROE), which is calculated using the trailing 12-month earnings
per share figure and latest book value per share; and
• Current Internal Growth Rate (g), which is calculated using return on equity and
the dividend payout ratio.
1.2.3 CASH EARNINGS PER SHARE (CEPS)
MSCI defines cash earnings as earnings per share, as stated above, including
depreciation and amortization as reported by the company. In cases where
amortization is not reported, then only depreciation is added back to earnings in
order to calculate cash earnings. In addition, where a company does not report
depreciation and / or amortization values in its interim financial statements, the
latest fiscal values will be used to compute CEPS.
Due to the nature of business of Banks (GICS® Industry Group 4010) and Insurance
companies (GICS® Industry Group 4030), MSCI does not publish cash earnings.
MSCI uses cash earnings per share to calculate:
Price/Cash Earnings, which is calculated using the trailing 12-month cash earnings
per share figure.
1.2.4 DIVIDENDS PER SHARE (DPS)
MSCI defines regular cash dividends as those paid from annual operating profits
and/or accumulated earnings, while capital repayments or returns of capital are
defined as cash distributions from the company’s share capital or additional paid-in
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capital (capital contribution reserve). Regular capital repayments are considered as
regular cash dividends.
To estimate the current annualized dividend, MSCI takes the sum of all the declared
regular cash distributions (dividends or capital repayments), including the ones not
yet ex or paid, over the latest 12-month period.
However, if the regular cash distribution frequency is changed, the latest 12 months
of distribution may not be available. An example may be when the distribution
frequency is changed from annual to semi-annual which yields either latest 6 months
of distributions or latest 18 months of distributions. In this case, MSCI estimates the
current annualized dividend by using the latest 6 months of distribution if resulting in
a higher amount than the previous annualized dividend. If the latest 6 months of
distribution is lower than the previous annualized dividend, MSCI keeps the previous
annualized dividend without taking the latest 6 months of distribution into
consideration.
In the US and Canada, however, regular cash distributions are annualized by
multiplying the latest cash distributions by the frequency of the regular cash
distributions’ payments. This is done to capitalize on the regularity of the regular
cash distributions’ information in providing a forward-looking approach for the US
and Canada.
MSCI uses dividends per share for two purposes:
• Dividend yield, which is calculated using the annualized dividend per share figure;
and
• Current Internal Growth Rate (“g”), which is calculated using the dividend payout
ratio and return on equity.
Dividend per share is calculated using the gross dividend of a security (i.e., before
any applicable withholding tax). Capital repayments are usually not subject to
withholding tax. Special cash dividends, unless they are paid for three consecutive
years, and extraordinary capital repayments are excluded from the dividend yield
calculation.
Yields are gross, before withholding tax, and take into account special tax credits
when applicable.
1.2.5 BOOK VALUE PER SHARE (BVPS)
MSCI defines book value as shareholders’ equity available to shareholders at the
latest period end date excluding minority interest, treasury shares and preferred
shares that do not exhibit equity like characteristics.
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MSCI uses the book value per share for three purposes:
• Price/Book Value, which is calculated using the latest book value per share;
• Return on Equity (ROE), which is calculated using the latest book value and the
trailing 12-month earnings per share figure; and
• Current Internal Growth Rate (“g”), which is calculated using return on equity and
the dividend payout ratio.
1.3 FORECASTED PER SHARE DATA
Forecasted variables are based on consensus earnings estimates taken from
financial analysts as provided by Refinitiv I/B/E/S for all countries except Japan. For
Japan, data from Toyo Keizai is used for securities that are not covered by Refinitiv
I/B/E/S. MSCI uses forecasted data along with historical data to provide a
comprehensive assessment of a company’s performance.
MSCI independently monitors the quality of data from Refinitiv I/B/E/S and Toyo
Keizai on an ongoing basis. MSCI may under exceptional circumstances elect to use
data from alternative sources if MSCI determines that the primary source data is not
reflective of market conditions. In such circumstances, and if deemed material, MSCI
will release a public announcement to inform clients about the change. All such
determinations are made by the MSCI Equity Index Committee (EIC). If appropriate,
MSCI may conduct a consultation with the investment community to gather
feedback on the most relevant alternate source.
MSCI defines two types of earnings per share based on forecasts:
• EPS
12F
= 12-month forward EPS estimate derived on a rolling basis from the
consensus of analysts’ earnings estimates for the current fiscal year and the next
fiscal year.
Where
• EPS
1
is the consensus of analysts’ earnings estimates for current fiscal year.
• EPS
2
is the consensus of analysts’ earnings estimates for the next fiscal year.
• M is the number of months remaining before the current fiscal year end
• The current fiscal year corresponds to the fiscal year following the last fiscal year
for which the company has made its results publicly available
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For cases where EPS
2
is not available and M is greater than or equal to 8, EPS
1
is
used as an approximation of EPS
12F
.
Example:
Calculating the 12-month forward earnings as of January 10, 2010:
Security A
Security B
Security C
Latest reported Fiscal Year
Dec 31, 2009
Mar 31, 2009
Dec 31, 2008
M
11
2
11
EPS
1
0.64
1.04
1.04
EPS
1
date
Dec 31, 2010
Mar 31, 2010
Dec 31, 2009
EPS
2
0.74
1.52
1.52
EPS
2
date
Dec 31, 2011
Mar 31, 2011
Dec 31, 2010
EPS
3
1.72
EPS
3
date
Dec 31, 2011
EPS12F
0.65
1.44
1.54
For Security C, the results for the fiscal year ending December 31, 2009 are not yet available. As a
result, the EPS
1
estimates still pertain to the fiscal year ending December 31, 2009. Therefore, in
order to have meaningful 12-month forward earnings, the EPS
2
and the EPS
3
are used instead of
the EPS
1
and EPS
2
.
• EPS
12B
= backward 12-month EPS derived in a similar fashion as the EPS
12F
but
using the EPS from the last reported fiscal year and the consensus of analysts’
earnings estimates for the current fiscal year.
Where
• EPS0 is last fiscal year end reported earnings per share
• EPS1 is the consensus of analysts’ earnings estimates for current fiscal year.
EPS12F and/or EPS12B are used to calculate:
• Price to 12-month forward earnings; and
• Short-term forward EPS growth rate
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Example:
Calculating the Short-term forward EPS growth rate as of the January 10, 2010:
Security A
Security B
Security C
Fiscal Year End
Dec 31, 2009
Nov 30, 2009
Mar 31, 2009
M
11
10
2
EPS
0
0.50
-0.30
0.89
EPS
1
0.64
-0.15
1.04
EPS
2
0.74
0.25
1.52
EPS12
F
0.65
-0.08
1.44
EPS12
B
0.51
-0.28
1.02
ST fwd EPS G
26.7%
69.7%
41.9%
All forecasted data is refreshed monthly.
In order to calculate the short-term forward EPS growth rate, if the EPS of the last
reported fiscal year is missing from the data vendor, then MSCI’s last reported fiscal
year EPS will be used.
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2 SECURITY RATIOS
Security ratios are derived using fundamental per share data as defined in the
preceding section and are used by MSCI to define the investment style of a security.
MSCI calculates two types of security ratios:
• Valuation Ratios
• Other Financial Ratios
This section provides details on the definitions and computations of the variables
used to calculate security ratios.
2.1 VALUATION RATIOS
In general, all valuation ratios are calculated using the following formula:
This formula applies to:
• Price to Sales (P/S)
• Price to Earnings (P/E)
• Price to Cash Earnings (P/CE)
• Price to Book Value (P/BV)
• Price to Earnings Forward (P/E fwd)
• While for
• Dividend Yield (YIELD) we use the inverse of the above formula.
2.2 OTHER FINANCIAL RATIOS
2.2.1 LONG-TERM HISTORICAL GROWTH TRENDS
MSCI calculates two historical growth trends, showing the evolution of fundamental
data over the last five years.
• Long-term historical EPS growth trend (EGRO)
• Long-term historical SPS growth trend (SGRO)
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To calculate the EGRO and SGRO, first MSCI applies a regression using the ordinary
least square method to the last five-years’ EPS and SPS, respectively.
Where:
• a, the slope coefficient,
• b, the intercept,
• t, the year expressed in number of cumulative months.
Then, we calculate an average absolute EPS or SPS:
Finally, we calculate the growth trend as follows:
Example #1
Calculating the Long-term historical EPS and SPS growth trend
Fiscal Year End Date
T
EPS
SPS
Fiscal Year End 0
December 31, 2002
0
(1.11)
7.71
Fiscal Year End 1
December 31, 2003
12
(0.51)
8.19
Fiscal Year End 2
December 31, 2004
24
0.29
8.57
Fiscal Year End 3
December 31, 2005
36
0.92
8.87
Fiscal Year End 4
December 31, 2006
48
1.41
11.5
A
0.05
0.07
a, annualised
0.65
0.83
Average Absolute
0.85
8.97
Growth trend
76.30%
9.20%
A minimum of the last four comparable EPS or SPS values is needed to compute the
historical growth trends. Growth trends for securities without at least four years of
comparable EPS or SPS data are not calculated and/or used to attribute the style of a
security. In order to provide meaningful historical growth trends, MSCI may restate
EPS and SPS to reflect the impact of corporate events that may affect historical
financial data on an on-going basis. Please note that the previously published
financial data will not be revised.
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For certain corporate events where there is a Large impact on sales and earnings,
MSCI will determine comparability over a five year period using sales variation which
is deemed to be more stable as compared to earnings.
• Whenever post event annual sales increase by more than 50% or decrease
by less than 33% and;
• The variation is determined not to be due to normal continuous business
operations ( i.e. corporate event, change in accounting standards, or
business restructuring):
MSCI will mark the post event fiscal year reporting as non-comparable in sales and
earnings against previous fiscals and drop the 5 year growth rate calculation.
If only the post event interim sales is published by the company, MSCI will wait for
the post event annual sales to determine comparability and will continue to publish
the pre-event fundamental data.
2.2.2 RETURN ON EQUITY (ROE)
The following formula is used to calculate return on equity:
The ROE, which is expressed in percentage terms, is considered meaningful and
calculated only if the following conditions are met:
• the book value is positive;
• the difference between the book value date and earnings date is less than 18
months;
• the book value date is equal to or older than the earnings date and;
• book value and earnings are both consolidated or both non-consolidated.
Otherwise, the ROE value is considered missing and left blank.
2.2.3 PAYOUT RATIO
Payout ratio is calculated using the annualized dividend per share divided by the
trailing 12-month earnings per share.
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2.2.4 CURRENT INTERNAL GROWTH RATE (G)
The following is the formula for current internal growth rate:
Payout ratio is calculated using the annualized dividend per share divided by the
trailing 12-month earnings per share.
ROE is calculated using the trailing 12-month earnings per share divided by the most
recently reported book value, as shown is section 2.2.2, entitled “Return on Equity.”
If either the payout ratio or the return on equity is not available, the current internal
growth rate is not calculated.
2.2.5 SHORT-TERM FORWARD EARNINGS PER SHARE GROWTH RATE (EGRSF)
The EGRSF is a measure of the expected growth of a security over the next 12
months from the calculation date.
The EGRSF is computed as follows:
2.2.6 LONG-TERM FORWARD EARNINGS PER SHARE GROWTH RATE (EGRLF)
The LT fwd EPS G is the consensus of analysts’ earnings growth rate estimates
typically provided for the next 3 to 5 years. In cases where the LT fwd EPS G is
considered an outlier (greater than 50% or less than -33%) and the corresponding
estimate is based on only one contributor, the variable will not be used by MSCI.
2.2.7 EARNINGS VARIABILITY (EVAR)
MSCI calculates Earnings Variability as the standard deviation of year-on-year
Earnings per Share (EPS) growth in the last five fiscal years.
• Where
= (EPS
i
– EPS
i-1
)/EPS
i-1
•
= mean (
)
• n denotes number EPS growth data points i.e. 4 in case of earnings variability
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Calculating the Earnings Variability
Fiscal Year End
Date
EPS
EPS (gi)
Fiscal Year End 0
30-Sep-12
4.04
Fiscal Year End 1
30-Sep-13
5.48
35.64%
Fiscal Year End 2
30-Sep-14
6.39
16.60%
Fiscal Year End 3
30-Sep-15
15.41
141.15%
Fiscal Year End 4
30-Sep-16
28.05
82.02%
EVAR is calculated using the last 5 fiscal EPS figures, where
• Y-O-Y EPS growth(year(n)) = (EPS(year(n)) – EPS(year(n-1)))/(EPS(year(n-1))
If EPS(year(n-1)) > 0
• Y-O-Y EPS growth(year(n)) = - (EPS(year(n)) – EPS(year(n-1)))/(EPS(year(n-
1)) If EPS(year(n-1)) < 0
• If EPS for year n-1 is 0, EPS growth would be Null for the period n
• A minimum of the last five comparable EPS values are needed to compute
the earnings variability
In order to provide meaningful historical data, MSCI restates EPS to reflect the
impact of corporate events that may affect historical financial data.
2.2.8 ENTERPRISE VALUE TO CASH VALUE (EV/CFO)
The following formula is used to calculate the EV/CFO
The ratio is calculated using:
• Enterprise value and net cash flow from operations figures as of the Fiscal
year end.
• The ratio is calculated currently using, only fiscal year end data.
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Example for security A, the data as of fiscal year end September 2016:
Data point
Value (USD Million)
Enterprise value (EV)
6,20,842
Net cash flow from operations
(CFO)
65,824
The EV/CFO ratio is not calculated if the following conditions are met:
• Both the enterprise value and cash flow from operations figures are negative
(<0)
Data point
Details
Enterprise value (EV)
Market capitalization at fiscal year-end date + preferred stock +
minority interest + total debt - cash and cash equivalents
Net cash flow from
operations (CFO)
Net cash receipts and disbursements resulting from the
operations of the company
2.2.9 DEBT REDUCTION YIELD (DRY/LDRY)
Debt reduction yield is calculated using reduction in total debt over the last fiscal
year and the latest fiscal year enterprise value
Long term debt reduction yield is calculated using reduction in long-term debt over
the last fiscal year and the latest fiscal year enterprise value
Where t denotes the latest fiscal year end.
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The ratio is calculated using:
• Enterprise value, total debt and long-term debt figures only as of the fiscal
year end
• The ratio is calculated currently using, only fiscal year end data.
Example for security A (in USD million):
Data point
Sep 30 2016 (t)
Sep 30 2015 (t-1)
Total debt
64,462
87,032
Enterprise Value
620,842
Data point
Details
Total debt (TD)
Total Debt represents all interest bearing, capitalized lease and
operating lease obligations.
Long term debt (LTD)
Long-term debt represents all interest bearing financial
obligations, excluding amounts due within one year.
Enterprise value (EV)
Market capitalization at fiscal year-end date + preferred stock +
minority interest + total debt - cash and cash equivalents
The DRY ratio is not calculated if the following conditions are met:
• If the Enterprise value as of fiscal year end is negative (<0)
2.2.10 DEBT TO EQUITY (D/E)
Debt to equity is calculated using the total debt and book value of the shareholders’
equity
The ratio is calculated using:
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• Shareholder’s equity and total debt figures of the latest fiscal year end
• The ratio is calculated currently using, only fiscal year end data.
Example for security A, the data as of fiscal year end:
Data point
Value (USD million)
Total debt
64,462
Shareholder’s equity
128,249
Data point
Details
Total debt (TD)
Total Debt represents all interest bearing, capitalized lease and
operating lease obligations.
Shareholder’s equity
Refer section 1.2.5 for details on the shareholder’s equity
2.2.11 5 YEAR DPS GROWTH RATE (5Y DPS G)
For the calculation of the 5Y DPS growth, first a regression (ordinary least squares
method) is applied to the last 5 yearly DPS.
btaDPS
t
+=
Where:
• a, the slope coefficient,
• b, the intercept,
• t, the year expressed in number of cumulative months
Then, we calculate an average absolute DPS
=
=
n
i
i
n
DPS
SPD
1
~
~
Finally, we calculate the growth trend as follows:
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SPD
a
GYDPS
DPS
~
~
5 =
Fiscal Year End Date
T
DPS
Fiscal Year End 0
September 30, 2016
48
2.18
Fiscal Year End 1
September 30, 2015
36
1.98
Fiscal Year End 2
September 30, 2014
24
1.81
Fiscal Year End 3
September 30, 2013
12
1.62
Fiscal Year End 4
September 30, 2012
0
0.38
A
-0.033
a, annualized
-0.396
Average Absolute
1.594
Growth trend
-24.84%
The ratio is calculated using:
• A minimum of the last five comparable DPS values is needed to compute the
5Y DPS G .If 5 years of comparable data is not available , the growth rate is
not calculated
• In order to provide meaningful historical growth trends, MSCI restates DPS to
reflect the impact of corporate events that may affect historical financial
data.
Data point
Details
Annualized DPS
Refer section 1.2.4 for details.
2.2.12 1 YEAR DPS GROWTH RATE (1Y DPS G)
The 1Y DPS growth rate is the difference between the current and previous
annualized DPS.
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Where t denote the latest fiscal year end
Fiscal Year End Date
T
DPS
Fiscal Year End 0
September 30, 2016
t
2.18
Fiscal Year End 1
September 30, 2015
t-1
1.98
Data point
Details
Annualized DPS
Refer section 1.2.4 for details.
2.2.13 CASH ROA (CROA)
Cash ROA is calculated using the net cash flow from operations and total assets of a
company.
The ratio is calculated using:
• Net cash flow from operations and Total assets of the latest fiscal year end
• The ratio is calculated currently using, only fiscal year end data.
Example for security A, the data as of fiscal year end:
Data point
Value (USD million)
Net cash flow from operations
64,462
Total Assets
321,686
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Data point
Details
Net cash flow from
operations
Net cash receipts and disbursements resulting from the
operations of the company.
Total assets
Total assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
2.2.14 3 YEAR AVERAGE EARNINGS
For example:
Fiscal Year End Date
Earnings ( USD million)
Fiscal Year End t
September 30, 2016
45,687
Fiscal Year End t-1
September 30, 2015
53,394
Fiscal Year End t-2
September 30 , 2014
39,510
• The average is calculated only using Fiscal year-end earnings.
• To compute the average, an equally weighted average of the three earnings
values is calculated. Only available earnings are used and missing earnings
are excluded from the calculation.
For instance If Earnings t-2 is missing:
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2.2.15 3 YEAR AVERAGE CASH EARNINGS
For example:
Fiscal Year End Date
Cash Earnings (USD million)
Fiscal Year End t
September 30, 2016
65,687
Fiscal Year End t-1
September 30, 2015
73,394
Fiscal Year End t-2
September 30 , 2014
49,510
• The average is calculated only using fiscal year-end cash earnings.
• To compute the average, an equally weighted average of the three cash
earnings values is calculated. Only available cash earnings are used and
missing cash earnings are excluded from the calculation.
For instance, If cash earnings t-2 is missing:
Data point
Details
Cash earnings
Refer section 1.2.3 for details
Data point
Details
Earnings
Refer section 1.22 for details
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2.2.16 3 YEAR AVERAGE SALES
For example:
Fiscal Year End Date
Sales ( USD million)
Fiscal Year End t
September 30, 2016
215,639
Fiscal Year End t-1
September 30, 2015
233,715
Fiscal Year End t-2
September 30 , 2014
182,795
• The average is calculated only using fiscal year-end sales.
• To compute the average, an equally weighted average of the three sales values
is calculated. Only available sales are used and missing sales are excluded
from the calculation.
For instance if sales
t-2
is missing:
Data point
Details
Sales
Refer section 1.2.1 for details.
2.2.17 CASH FLOW DIVIDEND COVERAGE RATIO
• The ratio is calculated using the net operating cash flow per share as of the fiscal
year end and the annualized DPS
For example:
Data point
Period end
Values (USD million)
Net operating cash flow per share
September 2016
12.52
Dividend per share
2.28
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Fundamental variable
Details
Dividend per share
Refer section 1.2.4 for details.
Cash flow from operations
Net cash receipts and disbursements resulting from
the operations of the company
2.2.18 DIVIDEND COVERAGE RATIO
For example:
Data point
Value (USD million)
EPS
8.43
Annualized DPS
2.28
Data point
Details
Dividend per share
Refer section 1.2.4
EPS
Refer section 1.2.2
2.2.19 CASH FLOW BY TOTAL CAPITAL
The ratio is calculated only using fiscal year-end data for net cash flow from
operations, total debt and shareholder’s equity.
Example for security A, the data as of fiscal year end:
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Information Classification: GENERAL
Data point
Values (USD million)
Net cash flow from operations (CFO)
16,868
Total Debt
40,819
Shareholder’s equity (book value)
11,870
The ratio is not calculated if:
• If total capital (total debt + shareholder’s equity) <0
Fundamental variable
Details
Total debt
Total Debt represents all interest bearing, capitalized lease
and operating lease obligations.
Shareholder’s equity
Represents common shareholders' investment in a company.
Net operating cash
flow
Net cash receipts and disbursements resulting from the
operations of the company
2.2.20 RETURN ON ASSETS (ROA)
The ratio is calculated only using earnings and total assets figures as of the latest
fiscal year end period.
Example for security A, the data as of fiscal year end:
Data point
Values (USD
million)
Earnings
16,868
Total assets
112,724
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Fundamental variable
Details
Total assets
Total assets represent the sum of total current assets, long-term
receivables, investment in unconsolidated subsidiaries, other
investments, net property plant and equipment and other assets.
Earnings
Net cash receipts and disbursements resulting from the operations
of the company
2.2.21 CAPITAL EXPENDITURE TO SALES (CAPEX/SALES)
The ratio is calculated using:
• Capital expenditure and the sales figures of the latest fiscal year end.
The ratio is not calculated or published as “0“if the following conditions are met:
• The difference between the Sales period end date and capital expenditure
period end date is greater than 18 months.
• If the company reports negative Sales.
• For all GICS sectors ex financials where the data is not reported, the ratio is
reported as "0".
Example for security A, the data as of December 2014:
Data point
Values (USD million)
Capital expenditure
3,740
Sales
92,793
Data point
Details
Capital expenditure
Capital expenditure as investment by a company to acquire or
upgrade fixed, physical, non-consumable assets, such as
buildings and equipment.
Sales
Refer section 1.2.1
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2.2.22 BUYBACK YIELD
The Buyback Yield is calculated at the issuer level using trailing 12 month (TTM)
number of common shares (NOS) outstanding adjusted for the corporate events and
the current NOS outstanding.
Issuer level buyback yield is calculated as market capitalization weighted average of
buyback yield values of all the common share class securities belonging to an issuer.
Preferred stocks and other share types such as units, warrants etc. are excluded
from the buyback yield calculation.
Where
• W
i
is the market capitalization weight of a common share class security in an
issuer with n securities
• Y
i
is the buyback yield of a common share class security calculated as
change in TTM NOS / Current Number of shares.
2.2.23 TOTAL YIELD
The Total yield is calculated using the Buyback yield and Dividend yield for a
company.
2.2.24 REINVESTMENT RATE
Reinvestment rate is calculated using return on equity (ROE), dividend yield, and price
to book value ratio (P/BV).
Data variable
Details
Buyback Yield
Refer section 2.2.22
Dividend Yield
Refer section 1.2.4 and 2.1
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For example:
Data point
Value (USD million)
ROE
10.07
Dividend Yield
5.67
P/BV
0.52
The reinvestment rate is not calculated if one of the ratios is not available.
Data point
Details
ROE
Refer section 2.2.2
Dividend yield
Refer section 2.1
Price to book value
(P/BV)
Refer section 2.1
2.2.25 ACCRUALS CASH FLOW
Accruals Cash Flow (ACF) is calculated as the negative change in accounts
receivable, inventories, accounts payable, accrued taxes, and other current
assets/liabilities, less depreciation, standardized by total assets.
Where, AR is accounts receivable, Inv is inventories, AP accounts payable, AT is
accrued taxes, OC is other current assets/liabilities, Dep is depreciation and TA is
total assets.
The ratio is calculated using:
• All fiscal year end data points from the same fiscal year.
• The values for accounts receivable, accounts payable, depreciation and total
assets are all available for the same fiscal year.
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2.2.26 ACCRUALS BALANCE SHEET
Accruals Balance Sheet (ABS) is calculated as the change in current assets net of
cash, less current liabilities net of short term debt, and less depreciation
standardized by total assets.
Where CA is current assets, CL is current liabilities, STD is short term debt, Dep is
depreciation and TA is total assets.
2.2.27 NET INCOME TO ISSUER MARKET CAPITALIZATION
Net income / Issuer MCap is calculated using the Net income and issuer market
capitalization for the company.
Example for security A, the data as of fiscal year end:
Data point
Value (USD Million)
Net income trailing 12 month value
62,842
Issuer Market Cap – month end
date
650,824
Data point
Details
Net Income
Trailing 12-month net income of the company
Issuer market
capitalization
Issuer level market capitalization of the company as of the
calculation date
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2.2.28 CASH EARNINGS TO ISSUER MARKET CAPITALIZATION
Cash Earnings / Issuer MCap is calculated using the Cash earnings and issuer
market capitalization for the company.
Example for security A, the data as of fiscal year end:
Data point
Value (USD Million)
Cash Earnings trailing 12 month
value
80,250
Issuer MCap – month end date
650,824
Data point
Details
Cash earnings
MSCI does not publish cash earnings for GICS® Industry
Group 4010 and GICS® Industry Group 4030. Refer to
Section 1.2.3 for more details.
Issuer market
capitalization
Issuer level market capitalization of the company as of the
calculation date
2.2.29 BOOK VALUE TO ISSUER MARKET CAPITALIZATION
Book Value / Issuer MCap is calculated using the shareholder’s equity (book value)
and issuer market capitalization for the company.
Example for security A, the data as of fiscal year end September 2016:
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Data point
Value (USD Million)
Book value
59,252
Issuer market cap – month end
date
650,824
Data point
Details
Shareholder’s equity
(Book Value)
Represents common shareholders' investment in a
company.
Issuer market
capitalization
Issuer level market capitalization of the company as of the
calculation date
2.2.30 RESEARCH AND DEVELOPMENT TO SALES (R&D/SALES)
R&D/Sales is calculated using the Research and Development Expense and Sales for
the company.
Example for security A, the data as of fiscal year end:
Data point
Value ( Million)
R&D Expense
3,740
Sales
92,793
Data point
Details
R&D Expense
Latest fiscal year research and development expense
Sales
Refer section 1.2.1
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2.2.31 ASSET TURNOVER (ATO)
Asset Turnover is calculated using Sales and Total Assets for the company as of
fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value ( Million)
Sales
64,462
Total Assets
128,249
Data point
Details
Total assets
Total assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
Sales
Refer section 1.2.1
2.2.32 GROSS PROFITABILITY (GP)
Gross Profitability is calculated using the sales, cost of goods sold, and total assets
for the company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value ( Million)
Sales
87,032
Cost of Goods Sold
64,462
Total Assets
620,842
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Data point
Details
Sales
Refer section 1.2.1 for details.
Cost of goods sold
Cost of goods sold represents specific or direct cost of labor
and material attributed to finished goods or services of a
company.
Total assets
Total assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
2.2.33 GROSS MARGIN (GM)
Gross Margin is calculated using sales and cost of goods sold for the company as of
fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value ( Million)
Sales
87,032
Cost of Goods Sold
64,462
Data point
Details
Sales
Refer section 1.2.1 for details.
Cost of goods sold
Cost of goods sold represents specific or direct cost of labor
and material attributed to finished goods or services of a
company.
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2.2.34 CASH EARNINGS TO EARNINGS (CETOE)
Cash earnings to earnings is calculated using earnings and cash Earnings for the
company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value ( Million)
Earnings
62,423
Cash earnings
87,542
Data point
Details
Cash Earnings
MSCI does not publish cash earnings for GICS® Industry
Group 4010 and GICS® Industry Group 4030. Refer to
Section 1.2.3 for more details.
Earnings
Refer section 1.2.2 for details.
2.2.35 FREE CASH FLOW TO SALES (FCF/SALES)
Free cash flow to sales is calculated using net cash flow from operations, capital
expenditure and sales for the company as of fiscal year.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Net cash flow from operations
852,640
Capital expenditure
501,250
Sales
500,000
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Data point
Details
Capital expenditure
Capital expenditure as investment by a company to acquire
or upgrade fixed, physical, non-consumable assets, such as
buildings and equipment.
Net cash flow from
operations (CFO)
Net cash receipts and disbursements resulting from the
operations of the company
Sales
Refer section 1.2.1 for details.
2.2.36 FREE CASH FLOW TO NET INCOME (FCF/NET INCOME)
Free cash flow to net income is calculated using net cash flow from operations,
capital expenditure and net Income for the company as of fiscal year.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Net Cash Flow from Operations
852,640
Capital Expenditure
501,250
Net Income
500,000
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Data point
Details
Capital expenditure
Capital expenditure as investment by a company to acquire
or upgrade fixed, physical, non-consumable assets, such as
buildings and equipment.
Net cash flow from
operations (CFO)
Net cash receipts and disbursements resulting from the
operations of the company.
Net Income
Net earnings of the company as of fiscal year end.
2.2.37 EARNINGS BEFORE INTEREST AND TAXES TO ENTERPRISE VALUE (EBIT/EV)
Earnings before interest and taxes to enterprise value is calculated using earnings
before interest and taxes and enterprise value for the company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Earnings before interest and taxes
352,640
Enterprise value
1,500,010
Data point
Details
Earnings before interest
and taxes (EBIT)
Earnings of the company before interest expense and taxes.
Enterprise value (EV)
Market capitalization at fiscal year-end date + preferred
stock + minority interest + total debt - cash and cash
equivalents
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2.2.38 EARNINGS BEFORE INTEREST AND TAXES TO TOTAL ASSETS (EBIT/TOTAL
ASSETS)
Earnings before interest and taxes to total assets is calculated using earnings before
interest and taxes and total assets for the company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Earnings before interest and taxes
64,462
Total Assets
321,686
Data point
Details
Earnings before Interest
and taxes (EBIT)
Earnings of the company before interest expense and taxes.
Total assets
Total Assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
2.2.39 ABSOLUTE GROWTH RATES
MSCI calculates growth trends using absolute values, showing the evolution of
fundamental data over the last five years.
• Total Asset Growth (AGRO)
• Capital Expenditure Growth (CXGRO)
• Issuance Growth (IGRO)
• Total Sales Growth
• Total Earnings Growth
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To calculate the absolute growth rates, MSCI applies a regression using the ordinary
least square method to the last years and calculate the average absolute of the
respective fundamental data. A minimum of the last four comparable absolute value
fundamental data is needed to compute the historical growth trends.
Refer to Section 2.2.1 for detailed example.
2.2.40 WORKING CAPITAL TO TOTAL ASSETS
Working Capital to Total Assets is calculated using Current Asset, Current Liabilities
and Total Assets for the company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Current Assets
16,868
Current Liabilities
3,740
Total Assets
215,639
Data point
Details
Current Assets
Refer to Section 5 for details.
Current Liabilities
Refer to Section 5 for details.
Total Assets
Total Assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
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2.2.41 ISSUER MARKET CAPITALITALIZATION TO TOTAL LIABILITIES
Issuer market capitalization to total liabilities is calculated using the issuer market
capital as of calculation month end and total liabilities of the latest fiscal period end.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Issuer Market Cap – month end
2,689,300
Total Liabilities
215,639
Data point
Details
Total Liabilities
All short and long term debt obligations of the company.
Issuer market
Capitalization
Issuer level market capitalization of the company as of the
calculation month end date
2.2.42 RETAINED EARNINGS TO TOTAL ASSETS
Retained earnings to total assets is calculated using retained earnings and total
assets for the company as of fiscal year end.
Example for security A, the data as of fiscal year end:
Data point
Value (Million)
Retained earnings
5,868
Total assets
321,686
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Data point
Details
Retained earnings
Accumulated after tax earnings of a company which have
not been distributed to shareholders.
Total assets
Total Assets represent the sum of total current assets, long-
term receivables, investment in unconsolidated subsidiaries,
other investments, net property plant and equipment and
other assets.
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3 INDEX RATIO
In general, index ratios computed by MSCI result from the aggregation of the
constituent using the methodology that best reflects the underlying index.
To reflect the underlying index methodology, index ratios are calculated taking into
account each security’s inclusion factor, which consists of the free float-adjustment
and the style inclusion factor. For MSCI’s international index series, the inclusion
factor is the foreign inclusion factor (FIF) and for the MSCI’s domestic Indexes, the
inclusion factor is the domestic inclusion factor (DIF). For the former, the appropriate
FIF is multiplied by the value inclusion factor (VIF) for the value Indexes and by the
growth inclusion factor (GIF) for the growth Indexes. For the latter series (i.e.
domestic Indexes), FIF is replaced by DIF.
MSCI calculates two types of index ratios:
• Valuation ratios
• Other Financial Ratios
The following section details the calculations of these ratios.
3.1 INDEX VALUATION RATIOS
MSCI calculates index valuation ratios by aggregating securities using the following
formula:
where n=number of companies included in the calculation
If the trailing 12-month per share figure is not available for a security, that security
will be excluded from the calculation for that particular ratio.
This formula applies to:
• Price to Earnings (P/E)
• Price to Earnings Forward (P/E Fwd)
• Price to Earnings Backward (P/E Bwd)
• Price to Cash Earnings (P/CE)
• Price to Book Value (P/BV)
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while for
• Dividend Yield (YIELD) we use the inverse of the above formula.
3.2 OTHER INDEX FINANCIAL RATIOS
Other financial ratios calculated by MSCI include the following:
• Return on Equity (ROE)
• Payout Ratio
• Current Internal Growth Rate (g)
• Short-term Forward EPS Growth Rate (EGRSF)
• Long-term Growth Rates/Trends
• 12-month Index EPS
• Year on Year Growth EPS
• Estimated Daily Dividend Yield
3.2.1 RETURN ON EQUITY (ROE)
Return on equity at an index level, which attempts to show the average return on
equity for an index, is calculated using the recalculated earnings divided by the
recalculated book value, as defined by the following formula:
3.2.2 PAYOUT RATIO
Payout ratio at an index level is calculated using price to earnings and the dividend
yield at an index level, as defined in the following formula:
3.2.3 CURRENT INTERNAL GROWTH RATE (G)
The current internal growth rate at an index level is calculated using the return on
equity and the payout ratio at an index level, as defined in the following formula:
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3.2.4 SHORT-TERM FORWARD EPS GROWTH RATE (EGRSF)
The short-term forward EPS growth rate is the percentage change between the
recalculated earnings backward and the recalculated earnings forward. It is
calculated using the following formula:
• Index P/E12B=Index level Price to Earnings Backward based on EPS12B for all
securities included in the index.
• Index P/E12F=Index level Price to Earnings Forward based on EPS12F for all
securities included in the index.
EPS12F (12-month forward EPS) and EPS12B (12-month backward EPS) are as
defined in section 1.3.
Price to Earnings Backwards is calculated using the index level valuation ratio
formula as defined in Section 3.1.
3.2.5 LONG-TERM GROWTH RATES/TRENDS
Long-term growth rates and trends at an index level are computed by MSCI from the
aggregation of the constituents’ security level data using the following formula:
Current share price×Total current security shares outstanding×Inclusion factor
(Current share price×Total current security shares outstanding×Inclusion factor)
n
i=1
×Growth Rate
n
i=1
where n=number of companies included in the calculation
This formula applies to:
• Long-term Forward EPS Growth Rate (EGRLF)
• Long -term Historical EPS Growth Trend (EGRO)
• Long-term Historical SPS Growth Trend (SGRO)
3.2.6 12-MONTH INDEX EPS
MSCI calculates the 12-month index EPS by combining an index level with its
underlying price to earnings ratios, thereby creating a new theoretical per share
figure at an index level that reflects the evolution of the EPS for an index. MSCI
calculates:
• 12 months trailing Index EPS
• 12 months forward Index EPS
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The following formula is used to calculate these 12-month index ratios:
3.2.7 YEAR ON YEAR GROWTH EPS
Using the 12-month index EPS, as shown above, MSCI calculates an EPS growth rate
for an index. Year on year growth EPS relates earnings growth to the index level.
Currently, MSCI calculates these figures using:
• 12-Month Index Historical EPS
• 12-Month Index Forward EPS
The year on year growth rate is calculated using the following formula:
For details on index ratio calculation examples, see Appendix II, entitled “Index
Ratio Calculation Examples.”
3.2.8 ESTIMATED DAILY DIVIDEND YIELD
In addition to calculating a monthly dividend yield, MSCI computes, every weekday,
an estimated daily dividend yield, that takes into account annualized dividends and
regular capital repayments (if applicable), and prices at previous month end where
prices are adjusted by the month-to-date security performance. The estimated daily
index yield uses the current security weights.
The estimated daily dividend yield and the monthly yield are calculated for the same
Indexes.
Note that due to different calculation methodologies, the Estimated Daily Dividend
Yield at month-end date will not correspond to the Monthly Dividend Yield.
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Where
and
Where:
• AnnualizedDividend
EOPM
is the security annualized dividend as of the end of the
previous month.
• FXrateDividend
EOPM
is the FX rate of the annualized dividend currency of security
s vs USD at the end of the previous month. It is the value of 1 USD in foreign
currency.
• PricePerShare
EOPM
is the price per share of the security s at the end of the
previous month.
• FXrate
EOPM
is the FX rate of the price currency of security s vs USD at the end of
the previous month. It is the value of 1 USD in foreign currency.
• SecurityPriceIndex
t
is the security price index of security s at time t.
• SecurityPriceIndex
EOPM
is the security price index of security s at the end of the
previous month.
• ClosingNumberOfShares
t
is the number of shares of security s at time t.
• PricePerShare
t
is the price per share of security s at time t.
• FXrate
t
is the FX rate of the price currency of security s vs USD at time t. It is the
value of 1 USD in foreign currency.
• InclusionFactor
t
is the inclusion factor (e.g. Foreign Inclusion Factor, Domestic
Inclusion Factor, Growth Inclusion Factor, Value Inclusion Factor) of the security
s at time t.
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4 FUNDAMENTAL DATA TREATMENTS FOR CORPORATE
EVENTS
The following section details the treatment of fundamental data to account for a
corporate event. When a corporate event occurs, MSCI may adjust and/or restate
fundamental data in order to ensure comparability between the pre and post event
data.
For the treatment of fundamental data, MSCI categorizes corporate events as the
following:
• Nominal Changes in Capital Structure
• Real Changes in Capital Structure
• Both Nominal and Real Changes in Capital Structure
• Changes in Business Structure
For events such as share buybacks, special cash dividends, and debt-to-equity
swaps, no adjustment is made generally.
The policies and guidelines set forth apply in most corporate events. For corporate
events not described in this section or combinations of different types of corporate
events and other exceptional cases, MSCI will determine the most appropriate
implementation method and will announce it prior to the changes becoming effective
in the MSCI Equity Index Series.
4.1 NOMINAL CHANGES IN CAPITAL STRUCTURE
Nominal changes in capital structure, events that have no effect on the capitalization
of a security, require fundamental data to be adjusted in the same way that the price
of the security is adjusted using the price adjustment factor (PAF).
For fundamental per share data, if the corporate event leads to an increase in the
number of shares, the adjustment factor will decrease the value of the per share data
using the same terms of the corporate event. If the corporate event leads to a
decrease in the number of shares, the adjustment factor will increase the value of the
per share data using the same terms of the corporate event.
Illustration:
Split 2:1, with a nominal value change from 50 to 25
The shareholder exchanges 1 share of nominal 50 against 2 shares of nominal 25.
The price before split is 100 and the shareholder had 1 share at a price of 100
Then he has 2 shares which price is : 1*100/ 2 = 50
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The adjustment factor is (ex/cum) 50/100 = 0.50
Fundamental data per share figures are adjusted by this adjustment factor.
In the case of the current dividend rate, if the adjustment factor is between 0.8 and
1.25, no adjustment is made. MSCI assumes that any event that leads to an
adjustment factor within this range will typically not lead to a change in a company’s
dividend policy.
Security and index ratios will remain neutral to corporate events that result in
nominal changes in capital structure because fundamental per share data is
adjusted in the same proportion as price. Any changes that may be observed are due
to price performance or company fundamental data.
4.2 REAL CHANGES IN CAPITAL STRUCTURE
For all corporate events that involve a real change in capital structure, events that
cause a change in security market capitalization, a pro forma book value will be
calculated in order to reflect the incoming or outgoing market capitalization. All other
fundamental data will not be adjusted for such events including the current dividend
rate, except if earnings and/or cash earnings are negative.
Illustration:
Pro forma book value per share is calculated using the following formula:
The number of shares at BVPS date = 1000.
The book value per share before the public offering is EUR 25.
Event: Public placement of 100 shares @ EUR 50 per share.
New BVPS = (1000*25)+(100*50)
(1000 + 100)
New BVPS = 27.27
Adjustment Factor for BVPS = New BVPS/ Old BVPS = 1.09
If a company has multiple share classes, book value is adjusted by using the total
amount of capital raised in the issue.
Security and index ratios will change by the increase or decrease in the number of
shares and change in price. Price to book value, return on equity, and current internal
growth rate, at a security and index level, will change based on the new book value
per share.
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If earnings/cash earnings are negative, an adjustment factor is applied according to
the change in number of shares (Pre-event number of shares/ Post-event number of
shares) in order to avoid increasing losses artificially in P/E and P/CE calculations at
index level.
2
4.3 BOTH NOMINAL AND REAL CHANGES IN CAPITAL STRUCTURE
All corporate events that involve a nominal and real change in capital structure
require fundamental data to be adjusted in the same way that the price of the
security is adjusted using the price adjustment factor (PAF) due to the discount the
shares are offered at in relation to the market price, except:
In the case of the current dividend rate, if the adjustment factor is between 0.8 and
1.25, no adjustment is made. MSCI assumes that any event that leads to an
adjustment factor within this range will typically not lead to a change in a company’s
dividend policy.
If earnings or cash earnings are negative, an adjustment factor is applied according
to the change in number of shares (Pre-event number of shares/ Post-event number
of shares) in order to avoid increasing losses artificially in P/E and P/CE calculations
at index level.
1
In the case of book value, a pro forma book value will be calculated in order to reflect
the incoming or outgoing market capitalization.
4.4 CHANGES IN BUSINESS STRUCTURE
MSCI defines changes in business structure as events that cause a company’s on-
going business model to substantially change. Events that cause a change in
business structure include significant events such as significant mergers and
acquisitions and early index inclusions resulting from spin-offs and IPOs. MSCI uses
a threshold of an increase of 50% or greater or a decrease of 33% or more, relative to
2
When a corporate event results in incoming market capitalization and the company reports losses, MSCI adjusts the
trailing 12-month EPS. The loss per share will be recalculated using the number of shares after the corporate event to
avoid a decrease in earnings due to an increase in market capitalization.
For certain corporate events, MSCI will use post event shares to calculate the fundamental data per share in cases of
events such as equity swaps, conversion of debt to equity, dilutive rights, spin off etcetera provided either of following
conditions are met:
• An increase of 50% or greater or a decrease of 33% or more, relative to the company’s full market
capitalization before the event or;
• An increase of 50% or greater or a decrease of 33% or more, relative to the company’s outstanding shares
before the event
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the company’s full market capitalization before the event to identify such significant
events.
For these significant events, if the post-event entity moves from being a non-
constituent to a constituent of the Global Investable Market Index or moves from the
Small Cap Index to the Standard Index, the style characteristics of the affected
securities are reviewed. If the post-event entity moves from the Standard Index to the
Small Cap Index or remains in the same Size-Segment Index (with the Large and Mid
Cap Indexes being considered as one size index), the style characteristics of the
affected securities are not reviewed.
In cases where such a style review is performed, pro forma post-event fundamental
data provided by the post-event entity is used. If no pro forma post-event
fundamental data is provided, estimations of proforma fundamental data are
performed using actual figures provided by the post-event entity.
MSCI will also use estimated proforma fundamental data for the acquiring company
in acquisitions of loss-making companies, provided the acquired loss-making
companies meet the following conditions:
• The acquired loss-making company was a constituent of the MSCI Standard Size
Segment before the acquisition; and
• The 12-month trailing losses of the acquired loss-making company exceeded
USD 1bn at the end of the month previous to the ex-date of the acquisition event.
For the acquiring company, MSCI will use estimated proforma fundamental data
arrived at by use of pre-event fundamental data of both the acquiring company and
the acquired company. Such estimated fundamental data would be used until the
time the acquiring company starts reporting post-event fundamental data.
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5 BALANCE SHEET INFORMATION
MSCI covers the following Balance Sheet items in its product files.
Assets
Fixed Assets (FA)
Net fixed assets after accumulated depreciation; may be
blanked.
Investments (INV)
Equity participation in loans to subsidiaries, affiliates and
associated companies. Investments of pure portfolio
nature are excluded from this item whenever possible; may
be blanked
Other Assets (OA)
Assets that by their nature are not readily classifiable as
Fixed Assets, Investments or Current Assets (such as
intangible assets or non-current debtors). May aggregate
other balance sheet items if detailed breakdown is not
reported by the company; may be blanked
Current Assets (CA)
Include inventories, receivables, securities, bank balances,
cash and equivalent. May aggregate other balance sheet
items if detailed breakdown is not reported by the
company; may be blanked. For GICS® Sector 40
(Financials) and Sector 60 (Real Estate), MSCI does not
publish Current Assets.
Total Assets (TA) = FA + INV + OA
+ CA
Liabilities
Shareholders equity / Book Value
(BV)
Capital and all reserves of an equity nature; may be
blanked
Other Liabilities (OL)
Liabilities that by their nature are not readily classifiable as
Book Value, Long-term Debt or Current Liabilities, for
example minority interests, special provisions, pension
funds, deferred taxation, etc. May aggregate other balance
sheet items if detailed breakdown is not reported by the
company; may be blanked
Long Term Debt (LD)
Debt maturing in over one year; may be
blanked
Current Liabilities (CL)
Includes all liabilities of short-term nature, i.e. payable
within one year. May aggregate other balance sheet items
if detailed breakdown is not reported by the company; may
be blanked. GICS® Sector 40 (Financials) and Sector 60
(Real Estate), MSCI does not publish Current Liabilities.
Total Liabilities (TL) = BV + OL +
LD + CL
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MSCI also covers the following Balance Sheet ratio for its Global Equity Model
• Market leverage (MLEV)
It is calculated as
where MCAP is the market value of common equity at previous month-end, PREF is
the most recent book value of preferred equity, and LD is the most recent book value
of long-term debt.
• Book leverage (BLEV)
It is calculated as
where BV is the most recent book value of common equity, PREF is the most recent
book value of preferred equity, and LD is the most recent book value of long-term
debt.
• Debt-to-assets (DTOA)
It is calculated as
where LD is the long-term debt and CL are the current liabilities, and TA is most
recent book value of total assets.
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6 HYPERINFLATIONARY ECONOMIES – ADJUSTMENT OF
FUNDAMENTAL DATA
MSCI follows the guidelines provided under FRS (Financial Reporting Standard) 29 to
adjust fundamental data of companies belonging to hyperinflationary economies.
The standard states that:
Hyperinflation is indicated by characteristics of the economic environment of a
country, which include, but are not limited to, the following:
• The general population prefers to keep its wealth in non-monetary assets or in a
relatively stable foreign currency. Amounts of local currency held are
immediately invested to maintain purchasing power;
• The general population regards monetary amounts not in terms of the local
currency but in terms of a relatively stable foreign currency. Prices may be
quoted in that currency;
• Sales and purchases on credit take place at prices that compensate for the
expected loss of purchasing power during the credit period, even if the period is
short;
• Interest rates, wages and prices are linked to a price index; and
• The cumulative inflation rate over three years is approaching, or exceeds, 100%.
Accordingly, MSCI will review the inflation rates of countries on a periodic basis to
identify cases that meet the above threshold.
If a country qualifies as a hyperinflationary economy, MSCI may opt to publish the
fundamental data and all other security ratios and growth rates in a relatively more
stable foreign currency instead of the currency of the company’s country of
classification as mentioned in Section 1.1.3 in order to remove the impact of
hyperinflation.
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APPENDIX I: MSCI’S TREATMENT OF SOME SPECIFIC
ASPECTS OF IFRS
Under the regulation adopted by the Council of the European Union, all EU listed
companies are required to prepare their consolidated financial statements for
financial years beginning on or after January 1, 2005, in accordance with IFRS. In
addition, several companies in other regions including Norway, Switzerland, Australia,
Singapore, Hong Kong and China also adopted IFRS starting 2005. EU listed
companies that report using United States Generally Accepted Accounting Principles
('US GAAP') were permitted to continue doing so until 2007.
A transition from local GAAP to IFRS impacts the computation of historical long-term
earnings and sales trends because IFRS earnings and sales numbers may not be
comparable with the numbers reported using local GAAP. Historical earnings and
historical sales trends over a five-year period are important components of MSCI's
index construction methodology.
1) MSCI's approach to the treatment of amortization of goodwill:
In order to make five-year earnings comparable, MSCI will adjust historical [non-IFRS]
earnings by adding back "amortization of goodwill" for companies where the
difference between IFRS earnings and non-IFRS earnings is more than or equal to
10%. For companies with the largest percentage and absolute change in earnings
due to the adoption of IFRS, the discontinuation of goodwill amortization explains the
bulk of the earnings change in a majority of cases. 'Amortization of goodwill' is also
the only item for which historical pre-IFRS earnings data can be consistently adjusted
to make it comparable to IFRS data. For further details, please refer to MSCI's
consultation document -- 'MSCI Consultation on the Treatment of Financial Results
under IFRS'-- released in February 2006.
2) In order to make sales comparable, MSCI will make case-by-case adjustments.
3) MSCI's approach to the treatment of Gain / Loss due to Revaluation of property:
'Revaluation of property' can have a large impact on earnings of Real Estate
companies. Therefore, MSCI adjusts the earnings of real estate companies (i.e.,
companies falling under the GICS Industry Group 'Real Estate' for 'Gain / Loss due to
Revaluation of Investment Property').
To compute the trailing EPS of a real estate company that has opted to revalue its
investment property, MSCI adjusts the trailing EPS for the 'Gain / Loss due to
Revaluation of Investment Property' for the latest trailing period updated by MSCI.
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To compute the Long-term Historical EPS growth trend and to make the five year
earnings comparable, MSCI adjusts the EPS of fiscals reported by the company
under IFRS (December 2004 onwards) for the 'Gain / Loss due to Revaluation of
Investment Property'.
As a reminder, MSCI calculates:
1) Long-term Historical EPS growth trend, by performing a regression analysis of the
last five years' fiscal year-end earnings per share;
2) Long-term Historical SPS growth trend, by performing a regression analysis of the
last five years' fiscal year-end sales per share.
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APPENDIX II: INDEX RATIO CALCULATION EXAMPLES
This appendix provides examples on how index ratios are calculated.
The ratios are calculated by dividing the market capitalization of the relevant index by
the aggregated relevant fundamental data for all securities included in the relevant
index.
MSCI calculates index valuation ratios by aggregating securities using the following
formula:
where n=number of companies included in the calculation
If the trailing 12-month per share figure is not available for a security, that security
will be excluded from the calculation for that particular ratio.
This formula applies to:
• Price to Earnings (P/E)
• Price to Earnings Forward (P/E Fwd)
• Price to Earnings Backward (P/E Bwd)
• Price to Cash Earnings (P/CE)
• Price to Book Value (P/BV)
while for
• Dividend Yield (D/P) we use the inverse of the above formula
For Price to Earnings (P/E) and Price to Cash Earnings (P/CE) ratios, the security
level per share figure is the Trailing 12-month earnings per share and the Trailing 12-
month cash earnings per share respectively.
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
Each example runs a simulation with three securities in an index.
Example # 1
Calculating price to book value for MSCI Index
Security A
Security B
Security C
Price
USD 45.21
USD 15.40
USD 25.49
Book Value Per Share
USD 10.90
USD 7.80
USD 13.20
P/BV
4.15
1.97
1.93
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Exchange Rate
1.0
1.0
1.0
Foreign Inclusion Factor (FIF)
0.9
0.8
0.95
Inclusion Factor
0.9
0.8
0.95
Adjusted Market Capitalization (in millions of USD)
2044.22
503.52
300.51
Book Value (in millions of USD)
492.85
255.03
155.62
Total Adjusted Market Capitalization (in millions of USD)
2848.25
Recalculated Total Book Value (in millions of USD)
903.5
Index Level Price to Book Value
3.15
Example # 2
Calculating price to book value for MSCI Index
Security A
Security B
Security C
Price
USD 45.21
USD 15.40
USD 25.49
Book Value Per Share
USD 10.90
USD 7.80
USD 13.20
P/BV
4.15
1.97
1.93
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Exchange Rate
1.0
1.0
1.0
Foreign Inclusion Factor (FIF)
0.9
0.8
0.95
Value Inclusion Factor (VIF)
1.0
0.5
0.65
Inclusion Factor
0.9
0.4
0.62
Adjusted Market Capitalization (in millions of USD)
2044.22
251.76
195.33
Book Value (in millions of USD)
492.85
127.51
101.15
Total Adjusted Market Capitalization (in millions of USD)
2491.31
Recalculated Total Book Value (in millions of USD)
721.52
Index Level Price to Book Value
3.45
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
Example # 3
Calculating price to book value for MSCI Index using companies with different exchange
rates
Security A
Security B
Security C
Price (in local currency)
USD 45.21
USD 15.40
€ 25.49
Price exchange rate
1.00
1.00
0.83
Price (in US dollars)
45.21
15.40
30.71
Book Value Per Share (in local currency)
€ 10.90
USD 7.80
€ 13.20
Fundamental Data Exchange Rate
0.80
1.00
0.80
Book Value Per Share (in US dollars)
13.13
7.80
15.90
P/BV
3.44
1.97
1.93
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Inclusion Factor
0.90
0.80
0.95
Adjusted Market Capitalization (in millions of USD)
2044.22
503.52
362.06
Book Value (in millions of USD)
593.70
255.03
187.50
Total Adjusted Market Capitalization (in millions of USD)
2909.79
Recalculated Total Book Value (in millions of USD)
1036.32
Index Level Price to Book Value
2.81
Example # 4
Calculating price to earnings at an index level
Security A
Security B
Security C
Price
USD 45.21
USD 15.40
USD 25.49
Earnings Per Share
USD 0.12
USD 0.28
USD 15.21
P/E
376.75
55.00
1.68
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Exchange Rate
1.0
1.0
1.0
Inclusion Factor
0.9
0.8
0.95
Adjusted Market Capitalization (in millions of USD)
2044.22
503.52
300.51
Earnings (in millions of USD)
5.43
9.15
179.32
Total Adjusted Market Capitalization (in millions of
USD)
2848.25
Recalculated Total Earnings (in millions of USD)
193.9
Index Level Price to Earnings
14.69
MSCI.COM | PAGE 66 OF 71
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
Long-term growth rates and trends at an index level are computed by MSCI from the
aggregation of the constituents’ security level data using the following formula:
where n=number of companies included in the calculation
Example # 5
Calculating long-term forward EPS growth rate at an index level
Security A
Security B
Security C
Price (in USD)
45.21
15.40
25.49
EGRLF
11.45%
25.40%
8.47%
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Exchange Rate
1.0
1.0
1.0
Inclusion Factor
0.9
0.8
0.95
Adjusted Market Capitalization (in millions of USD)
2044.22
503.52
300.51
Total Adjusted Market Capitalization (in millions of
USD)
2848.25
Index Level EGRLF
13.60%
MSCI.COM | PAGE 67 OF 71
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
MSCI calculates the 12-month index EPS by combining an index level with its
underlying price to earnings ratios, thereby creating a new theoretical per share
figure at an index level that reflects the evolution of the EPS for an index. MSCI
calculates:
• 12 months trailing Index EPS
• 12 months forward Index EPS
The following formula is used to calculate these 12-month index ratios:
Example # 6
Calculating 12-month index EPS
Security A
Security B
Security C
Price (in USD)
45.21
15.40
25.49
Earnings Per Share (in USD)
0.12
0.28
15.21
P/E
376.75
55.00
1.68
Total Current Security Shares Outstanding (in millions)
50.24
40.87
12.41
Exchange Rate
1.0
1.0
1.0
Inclusion Factor
0.9
0.8
0.95
Adjusted Market Capitalization (in millions of USD)
2044.22
503.52
300.51
Earnings (in millions of USD)
5.43
9.15
179.32
Index Level Price to Earnings
14.69
Index Level
954.15
12-month Index EPS
64.96
MSCI.COM | PAGE 68 OF 71
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
APPENDIX III: CORRECTION POLICY
The rule for Valuation Ratios correction is as follows:
The correct valuation ratios (P/E, P/CE, P/Sales, P/BV, and Dividend Yield) are
calculated at security level and their yields are used to evaluate the impact of the
incorrect data on the security.
• If the incorrect security yields are within ±0.25% of the correct yields (±0.5% for book
value yield), no revision is done on the country and industry index. No announcement is
made by MSCI. Per share figures and valuation ratios at security level are revised in the
MSCI historical database.
• If the incorrect security yields are not within ±0.25% of the correct yields (±0.5% for
book value yield), an announcement is made by MSCI with the revised valuation ratios
at the security level. The impact of the incorrect security level data on the country index
and industry group is evaluated.
• If the incorrect index yields at country/industry level are within ±0.1% of the correct
yields (±0.5% for book value yield), no index revision is done. No announcement is made
by MSCI.
• If the incorrect index yields are not within ±0.1 of the correct yield (±0.5% for book
value yield), new valuation ratios are calculated, for all the Indexes in which the security
is included. For all Indexes where the incorrect yields lie outside the stated threshold, an
announcement is made by MSCI with the revised valuation ratios.
MSCI.COM | PAGE 69 OF 71
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MSCI FUNDAMENTAL DATA METHODOLOGY | MARCH 2020
Information Classification: GENERAL
METHODOLOGY BOOK TRACKED CHANGES
The following sections have been updated since July 2017:
1.2 Historical Per Share Data Calculations
2.2.1 Long-Term Historical Growth Trends
4.2 Real Changes in Capital Structure
The following sections have been updated since Nov 2018:
1.1.3 Currency and Frequency
1.2.1 Sales per Share (SPS)
1.2.3 Cash Earnings per Share (CEPS)
5 Balance Sheet Information
The following sections have been updated since March 2020:
1.3 Forecasted Per Share Data
MARCH 2020
MARCH 2020
Information Classification: GENERAL
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Information Classification: GENERAL
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