A measure of the after-tax and after-debt-service profitability of a company. The figure listed represents the portfolio's weighted average, calculated from the net earnings of each company in the portfolio over the trailing 12 months and from each company's total assets.
Benefits
Usually, but not always, funds that score well by this measure are those with high-earnings-growth rates as well.
Origin
Morningstar calculates this figure monthly, using portfolio data as it has been provided by OneSource, a financial information firm.
For the Pros
Statistics and Your Portfolio of Funds
Portfolio statistics play an important role in monitoring an already-assembled portfolio of funds. If a manager who has built a sterling record with small-capitalization stocks begins to invest in increasingly larger issues as the assets of his or her fund grow, astute investors will adjust their expectations accordingly. Similarly, if a self-proclaimed value manager begins to buy more costly stocks with higher growth rates, then his or her performance is less likely to track other value funds than it was in the past. Such trends are easy to miss if your only insights into a fund's composition are total return figures and fund literature. Portfolio statistics can be especially instructive when a fund company changes fund managers. Unless the fund has a very bad record, the fund's marketing department is apt to portray the change as business-as-usual, or, perhaps, a refinement of existing policies. In reality, new managers frequently big changes to fund portfolios that are never addressed in shareholder reports. Morningstar's portfolio statistics document the effect of the changes, allowing investors to intelligently rethink the altered fund's role in their portfolio.