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I would be curious if anyone has worked out how Morningstar or Quantconnect calculates "OperationRatios.LongTermDebtEquityRatio.ThreeMonths" where a stock has negative equity.
Cogent Communications (ticker CCOI) has negative shareholder's equity and has done so for some years. How then should you calculate its "OperationRatios.LongTermDebtEquityRatio.ThreeMonths"? Most people come up with a fairly useless negative value .
As you will see from the attached Notebook extract below, a figure of
520.151543
is arrived at for this ratio as of yesterday's date for ticker CCOI
How is this calculated? No explanation is given and shareholder's equity is stated as "None" rather than a negative figure.
An explanation would be welcome!
qb = QuantBook()
CCOI= qb.AddEquity("CCOI")
de = qb.GetFundamental(qb.Securities.Keys, "OperationRatios.LongTermDebtEquityRatio.ThreeMonths", start_time, end_time)
de
COI SBZ72LELB97P
2021-05-12 520.151543
2021-05-13 520.151543
Derek Melchin
Hi Anthony,
Morningstar calculates the ratio by using the underlying data reported in the Balance Sheet within the company filings or reports: Long-Term Debt And Capital Lease Obligation / Common Equity. [Note: Common Equity = Total Shareholder's Equity - Preferred Stock]
Best,
Derek Melchin
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Derek Melchin
Hi Anthony,
We've emailed MorningStar to clarify their formula for the long-term debt equity ratio. We'll update this thread when they respond.
Best,
Derek Melchin
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Anthony FJ Garner
Much appreciated, thank you.
Derek Melchin
Hi Anthony,
MorningStar has verified the formula above is correct. However, when equity is negative, the ratio should be NaN. We've opened a Data Issue to have the problem resolved. Subscribe to our progress here.
Best,
Derek Melchin
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Derek Melchin
Hi Anthony,
Thanks for making a note on the Data Issue. The data team will look into the other ratios that use equity as the denominator.
Yes, we can create our own fundamental ratios during fine universe selection. See the attached backtest for an example.
Best,
Derek Melchin
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Jared Broad
Try it and see Anthony, happy to refund it if it doesn't work. Then submit a live support ticket if it doesn't work and we'll see if we can find optimizations in the algorithm. More than likely we can support the universe you need.
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Anthony FJ Garner
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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