Future Readiness Indicator - Auto & Financial Industry 2022

The ranking results equally weighted each of the factors below, the raw data sources are:

1. Financial Fundamentals: Annual report/ Refinitiv/ Capital IQ/MarketSmith
2. Investors’ Expectation of Future Growth: Refinitiv/ Capital IQ
3. Employee Diversity/ESG: CSR reports/ Annual Reports/ Boardex Reports/company website, annual report/Refinitiv
4. Cash and Debt: Annual Report/ Capital IQ
5. Early Results of Innovation: Factiva
6. Business Diversity: Factiva/ Annual Reports/ marklines.com/ Crunchbase
7. Research and Development: Annual report/ Refinitiv/ Capital IQ
8. Business Productivity: CSR reports/ Annual Reports/Refinitiv
9. Openness to New Ideas: Factiva/ Crunchbase

Factor 1: Financial Fundamentals looks at the three-year average of Operating Revenue CAGR, profit rate (EBITDA), revenue per employee, eps rating, and earnings slope. A company's overall financial performance and progress over time are critical factors since a company cannot invest in new capabilities without sufficient resources.

Factor 2:  Investors’ Expectation of Future Growth considers 5-year average of P/E ratio, Price to Book value, the three-year average of Market Cap CAGR, and Enterprise Value/EBITDA ratio. This captures the general outlook of a company and investors' expectations of its future growth.

Factor 3: Employee Diversity/ESG looks at the percentage of women employees in senior management, percentage of women employees or percentage of women in manager positions, CEO demography, ESG score, and headquarters' competitiveness. Diversity is a vital part of innovation. The more gender-diverse the business environment is, the more "out-of-the-box" thinking will occur, opening the company to new ideas, cultures, and practices.

(For employee gender, we investigate the percentage of women in the top management team, the percentage of women employees (for automotive only), and the percentage of women in manager positions (for financial only).

ESG score is based on Refinitiv. It is the overall score based on the reported information in the environmental, social and corporate governance pillars (ESG Score) with an ESG Controversies overlay. ESG controversies category score measures a company's exposure to environmental, social and governance controversies and negative events reflected in global media over a period of time.)

Factor 4: Cash and Debt includes Quick Ratio, Cash to Total Assets, Total Debt to Equity, three-year average of net operating cash flow by revenue, and three years' Net Operating Cash Flow slope. These factors capture the trajectory of a company's cash flow.

Factor 5: The Indicator measures Innovation via keyword search in top media for innovation key trends. Identifying mentions of new products and services and observing the velocity and the volume of such mentions proxy the degree to which a company's new product gains traction in the marketplace.

Factor 6 (Automotive only): The Indicator determines Business Diversity using the Factiva press count on Venture Capital, percentage of International Sales, and the number of acquisitions and investments.

Factor 7 (Automotive only): Research & Development (R&D) looks at three-year averages of R&D expenses divided by Sales, R&D Intensity CAGR, R&D expenses, R&D expenses CAGR and number of patents in the past three years. It summarizes a company's R&D intensity.

Factor 8  (Financial only): Business Productivity: looks at Assets under management, operating revenue and profit per employee. We also consider operating expense ratio, e.g., how much a company spends to generate income into this category.

Factor 9 (Financial only): Openness to new ideas: looks at press counts on “Application Programming Interfaces” and “Ventures”, number of investments and acquisitions, number of patents in the past 3 years.