MSCI Fundamental Data Methodology
Information Classification: GENERALMSCI FundamentalData MethodologyMSCI Methodology for Fundamental DataMarch 2020MARCH 2020MARCH 2020
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020CONTENTSIntroduction . 61Fundamental Per Share Data . 101.11.1.1Number of shares . 101.1.2Consolidation . 111.1.3Currency and Frequency . 111.1.4Accounting Standards Used . 111.1.5Sources and Updates . 111.2Historical Per Share Data Calculations . 121.2.1Sales Per Share (SPS) . 131.2.2Earnings Per Share (EPS) . 131.2.3Cash Earnings Per Share (CEPS) . 141.2.4Dividends Per Share (DPS). 141.2.5Book Value Per Share (BVPS) . 151.32General Rules . 10Forecasted Per Share Data . 16Security Ratios . 192.1Valuation Ratios . 192.2Other Financial Ratios . 192.2.1Long-term Historical Growth Trends. 192.2.2Return on Equity (ROE) . 212.2.3Payout Ratio. 212.2.4Current Internal Growth Rate (g) . 222.2.5Short-term Forward Earnings Per Share Growth Rate (EGRSF) . 222.2.6Long-term Forward Earnings Per Share Growth Rate (EGRLF) . 222.2.7Earnings Variability (EVAR) . 222.2.8Enterprise Value to Cash Value (EV/CFO) . 23 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 2 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 20202.2.9Debt Reduction Yield (DRY/LDRY). 242.2.10Debt to Equity (D/E) . 252.2.115 Year DPS Growth Rate (5Y DPS G) . 262.2.121 year DPS Growth Rate (1Y DPS G) . 272.2.13Cash ROA (CROA). 282.2.143 Year Average Earnings . 292.2.153 Year Average Cash Earnings . 302.2.163 Year Average Sales . 312.2.17Cash Flow Dividend Coverage Ratio . 312.2.18Dividend Coverage Ratio . 322.2.19Cash flow by total Capital . 322.2.20Return on Assets (ROA) . 332.2.21Capital Expenditure to Sales (CAPEX/SALES). 342.2.22Buyback Yield . 352.2.23Total Yield . 352.2.24Reinvestment rate . 352.2.25Accruals Cash Flow . 362.2.26Accruals Balance Sheet . 372.2.27Net Income to Issuer Market capitalization . 372.2.28Cash Earnings to Issuer Market Capitalization . 382.2.29Book Value to Issuer Market Capitalization . 382.2.30Research and development to sales (R&D/Sales) . 392.2.31Asset Turnover (ATO) . 402.2.32Gross Profitability (GP) . 402.2.33Gross Margin (GM) . 412.2.34Cash Earnings to Earnings (CETOE). 422.2.35Free Cash Flow To Sales (FCF/Sales). 422.2.36Free Cash Flow to Net Income (FCF/Net Income) . 432.2.37Earnings Before Interest and Taxes to Enterprise value (EBIT/EV) . 44 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 3 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020342.2.38Earnings Before Interest and Taxes To Total Assets (EBIT/TotalAssets) . 452.2.39Absolute Growth Rates . 452.2.40Working Capital To Total Assets . 462.2.41Issuer Market Capitalitalization To Total Liabilities. 472.2.42Retained Earnings To Total Assets . 47Index Ratio . 493.1Index Valuation Ratios. 493.2Other Index Financial Ratios . 503.2.1Return on Equity (ROE) . 503.2.2Payout Ratio. 503.2.3Current Internal Growth Rate (g) . 503.2.4Short-term Forward EPS Growth Rate (EGRSF) . 513.2.5Long-term Growth Rates/Trends. 513.2.612-Month Index EPS . 513.2.7Year on Year Growth EPS. 523.2.8Estimated Daily Dividend Yield . 52Fundamental Data Treatments for Corporate Events . 544.1Nominal Changes in Capital Structure . 544.2Real Changes in Capital Structure . 554.3Both Nominal and Real Changes in Capital Structure . 564.4Changes in Business Structure. 565Balance Sheet Information . 586Hyperinflationary economies – Adjustment of FundamentalData . 60Appendix I: MSCI’s treatment of some specific aspects of IFRS. 61 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 4 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020Appendix II: Index Ratio Calculation Examples . 63Appendix III: Correction Policy . 68Methodology Book Tracked Changes. 69 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 5 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020INTRODUCTIONMSCI began publishing annual fundamental data for developed market companies in1969 and for emerging market companies in 1988. MSCI has accumulated a largevolume of historical fundamental data during this period.Fundamental DataSecurity Level RatiosHistorical CoverageEarnings per sharePrice to EarningsSince December 1969 for DMSince January 1992 for EMReturn on EquitySince March 1997 for DMSince December 1993 for EMCash Earnings per sharePrice to Cash EarningsSince January 1970 for DMSince January 1992 for EMSales per sharePrice to SalesSince January 1992 for EMcountriesSince January 2001 for DMcountriesBook Value per sharePrice to Book ValueSince December 1974 for DMSince January 1992 for EMDividends per shareDividend YieldSince December 1969 for DMSince January 1992 for EM5-years Sales, earnings, cashearnings, earnings per shareSince December 19695 year SPS growth trend , 5 yearEPS growth trendsSince June 2003Balance sheet itemsSince March 1971 for DMMSCI uses these fundamental data items to define: Fundamental per share data Security ratios Index ratios Balance Sheet information 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 6 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020In addition, MSCI uses fundamental data to calculate the variables used to assignstyle to securities under its Value and Growth methodology. The following tablesummarizes the key variables calculated by MSCI using fundamental data: 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 7 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020Table #1Fundamental Data Calculation SummaryFundamental Per Share Data Security Level RatiosSales Per ShareEarnings Per ShareIndex Level RatiosPrice to SalesLong-term Historical SalesPer Share Growth TrendLong-term Historical Sales PerShare Growth TrendPrice to EarningsPrice to EarningsLong-term HistoricalEarnings Per Share GrowthTrendLong-term Historical Earnings PerShare Growth TrendReturn on EquityReturn on EquityCurrent Internal Growth RateCurrent Internal Growth Rate12 Months Trailing Index EPSYear on Year Growth Trailing EPSCash Earnings Per SharePrice to Cash EarningsPrice to Cash EarningsDividends Per ShareDividend YieldDividend YieldPayout RatioPayout RatioPrice to Book ValuePrice to Book ValueBook Value Per ShareForecasted Earnings Per SharePrice to Earnings ForwardPrice to Earnings BackwardLong-term Forward Earnings PerShare Growth RateShort-term Forward Earnings PerShare Growth Rate12 Months Forward Index EPSYear on Year Growth Forward EPSFor certain corporate events MSCI may also adjust and/or restate fundamental dataand related ratios in order to maintain comparability between historical and futuredata. These adjustments are made based on the timing of the event and availabilityof information at the time of the event. 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 8 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020Depending on the MSCI Equity Index Series or the Global Equity Model, MSCI willprovide different fundamental data for each product on a monthly basis. Per sharedata and security ratios (price to sales, price to earnings, return on equity, price tocash earnings, price to book value, dividend yield) are provided for all MSCI EquityIndex Series and Global Equity Models. Fundamental data used for style attribution isdistributed 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 accountingstandards of each country in a consistent manner. The information provided in thismethodology book relates to all equity index products distributed by MSCI that usefundamental data. The book demonstrates MSCI’s use of fundamental data tocalculate financial ratios and indicators at both the security and index level.Additionally, this book demonstrates how MSCI uses fundamental data in connectionwith corporate events. 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 9 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 20201FUNDAMENTAL PER SHARE DATAMSCI provides per share data on an annualized basis and calculates the data on acompany level in which all classes (listed and unlisted) of equity are aggregated. Thetotal shares outstanding for the latest period is used for per share data calculations.MSCI provides two types of fundamental per share data: Historical ForecastedUsing historical and forecasted data, MSCI calculates security and index ratios. Thefollowing section details how MSCI gathers and calculates all fundamental per sharedata.1.1GENERAL RULES1.1.1NUMBER OF SHARESTo calculate per share figures, MSCI uses the total number of shares at the companylevel at the date of the results.All of the company’s share classes, listed and unlisted, are aggregated in the totalnumber of shares regardless of whether they are included in an index, as long as theyexhibit characteristics of equity securities and are eligible for the MSCI universe. Ifpreferred shares exhibit equity-like characteristics, they are included in the number ofshares for per share calculationMSCI always excludes stock options, warrants and convertible securities from thenumber of shares outstanding. In other words, diluted number of shares is not used.In general, treasury shares are systematically excluded from index level calculationsand 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 tocalculate per share figures, except United States of America, Canada, the UnitedKingdom and Ireland where average number of shares is used for per sharecalculations of earnings, cash earnings, and sales as is the standard practice inthese countries.For companies where MSCI tracks their Depository Receipts (ADR, GDR) orCertificates of Participation (CPO), MSCI reports the fundamental per-share variableson a ‘per-ADR / GDR’ or ‘per-CPO’ basis. 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 10 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 20201.1.2CONSOLIDATIONMSCI always calculates fundamental data using consolidated information unlessconsolidated 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 ofunconsolidated data for interim financial results whereas the fiscal period financialresults could be consolidated.1.1.3CURRENCY AND FREQUENCYMSCI reports fundamental data in the currency of a company’s country ofclassification based on GIMI Methodology. In general, MSCI follows the frequency ofthe company reporting. For example, if companies report quarterly results, MSCIalso follows quarterly results.1.1.4ACCOUNTING STANDARDS USEDThe primary accounting standard followed by MSCI is the local GAAP. If the companydoes 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 someother countries in the Asia-Pacific, MSCI started following IFRS accounting in theyear 2006 (please refer to Appendix I for details on MSCI’s treatment of somespecific issues related to IFRS).1.1.5SOURCES AND UPDATESMSCI sources company information from third party vendors as well as from publiclyavailable information made available by the companies. In addition, MSCI reflectspublicly available information once it is available in the market, provided that theinformation is complete. We commonly obtain information in the form of vendorfiles, press releases, interim and annual reports. MSCI uses both audited andunaudited reports.MSCI endeavors to ensure correctness, quality and timeliness of data loaded into itsdatabase, by employing quality control procedures like updating companyinformation only upon availability of complete information, such as official filingswith stock exchanges or regulators or upon dual vendor validation. Emphasis isplaced on updating the results of bigger companies first, but without undue delay forupdating the results for all companies. 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 11 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 20201.2HISTORICAL PER SHARE DATA CALCULATIONS1The following are the historical per share figures that are reported and/or used byMSCI: 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:𝑃𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝑓𝑖𝑔𝑢𝑟𝑒 𝑇𝑟𝑎𝑖𝑙𝑖𝑛𝑔 12 𝑚𝑜𝑛𝑡ℎ 𝑓𝑖𝑔𝑢𝑟𝑒𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑎𝑡 𝑎 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 ��12 𝑚𝑜𝑛𝑡ℎ𝑓𝑖𝑔𝑢𝑟𝑒 𝐿𝑎𝑠𝑡 𝑟𝑒𝑝𝑜𝑟𝑡𝑒𝑑 𝑓𝑖𝑠𝑐𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑 𝑓𝑖𝑔𝑢𝑟𝑒 (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑖𝑛𝑡𝑒𝑟𝑖𝑚 𝑓𝑖𝑔𝑢𝑟𝑒 𝐶𝑜𝑚𝑝𝑎𝑟𝑎𝑡𝑖𝑣𝑒 𝑖𝑛𝑡𝑒𝑟𝑖𝑚 𝑓𝑖𝑔𝑢𝑟𝑒)For instance, if the last period for which results are reported is for an interim periodof 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 monthearnings 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 thecompany for all calculations. Book value per share is calculated using the latest reported book value; a trailing12-month figure is not calculated.MSCI calculates security per share and ratios if the gap between calculation date andfinancial reporting period end date is less than 18 months. For example, per share1 MSCI will update Fundamental per share data for China A "Stock Connect" listings based on the offshore RMBexchange rate (CNH). In addition, for securities listed outside China and reporting their financials in RMB, MSCIwill publish fundamental per share data based on CNH effective March 2018 month-end. 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.MSCI.COM PAGE 12 OF 71
Information Classification: GENERALMSCI FUNDAMENTAL DATA METHODOLOGY MARCH 2020and ratios will not be calculated for a security reporting fundamental data as ofperiod ended Decem
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.
MSCI ACWI 3.06 2.75 5.39 17.11 20.02 MSCI EAFE 2.44 2.98 0.60 8.99 11.53 MSCI EAFE Growth 2.76 2.54 2.31 9.35 13.24 MSCI EAFE Value 2.11 3.43 (1.24) 8.25 9.49 . 5 15 25 35 45 55 65 75 85 95 VOLATILITY (VIX) ECONOMIC UPD
implementation of corporate events affecting securities across all the MSCI Equity Indices and products. While each MSCI Indices has its own separate index construction and maintenance methodology, MSCI endeavors to develop and maintain a set of corporate event implementation rules that are as generic as
MSCI ESG KLD STATS: 1991-2014 DATA SETS JUNE 2015 INTRODUCTION MSCI ESG KLD STATS (STATS) is an annual data set of positive and negative environmental, social, and governance (ESG) performance indicators applied to a universe of publicly traded companies. The MSCI ESG KLD STATS data set was
The MSCI Prime Value Indexes are constructed with a ‘fixed number of securities’ approach. . step, the remaining securities in the Quality Parent Universe with the highest final value score are added until the number of securities in the MSCI
the geographic focus of most funds was U.S. equities. Twenty Largest ESG Funds 2 All fund characterizations based on data from Broadridge and MSCI ESG Research, as of Dec. 31, 2020 . 3 Percentile rank of the fund within its peer group and within the global universe of funds in the MSCI coverage universe. 6 msci.com Exhibit 2: Fund Strategy .
MSCI is a leading provider of investment decision support tools to over 7,800 clients worldwide, ranging from large pension plans to boutique hedge funds MSCI continues to leverage its deep understanding of the world's financial markets to turn data-driven insights into products and
FORWARD P/E: MSCI WORLD EX-US vs S&P 500 VALUE (daily) 5/11 Forward P/E* MSCI World ex-US (11.9) S&P 500 Value (14.8) * Price divided by 12-month forward consensus expected operating earnings per share. Monthly through December 2005, weekly and daily thereafter. Source: I/B/E/S data by Refinitiv and MSCI. yardeni.com Figure 12. Growth vs Value
algebra, and differential equations to a rigorous real analysis course is a bigger step to-day than it was just a few years ago. To make this step today’s students need more help than their predecessors did, and must be coached and encouraged more. Therefore, while strivingthroughoutto maintain a high level of rigor, I have tried to writeas clearly and in- formallyas possible. In this .
