vvincii we show the working

Chuck Akre

High returns on equity, earned without leverage, with somewhere to reinvest them.

MeasureFormula MedianMiddle half Reporting it
Return on equityNet income ÷ shareholders’ equity11.7%6.3% – 20.4%537
Debt to equityTotal debt ÷ shareholders’ equity0.79x0.39x – 1.45x442
Cash conversionOperating cash flow ÷ net income1.78x1.36x – 2.42x414
Return on equity, sustainedNeeds ten years of filings

Where each comes from

Return on equityThe first leg: an extraordinary business, which he defines by a high return on equity sustained over time rather than by growth in reported earnings.
Debt to equityThe qualifier that does the work. A high return on equity produced by borrowing is not the same finding, so the leverage behind the number has to be read alongside it.
Cash conversionCompounding requires cash that actually arrives, since it is the cash that gets reinvested.
Return on equity, sustainedAkre's first leg is a high return on equity held over time rather than in one good year. He publishes no number, so this checks how many of the last ten years cleared the median of every company here — that reading is ours, not his.

Source: Akre Capital Management letters and interviews; the “three-legged stool”.

What this cannot tell you

The second and third legs — management acting like owners, and a reinvestment runway long enough to matter — are judgements about people and end markets. Neither is computable from a filing.

This page describes a published method and applies its measures to filings. It is not a score, not a ranking and not a recommendation, and no page here aggregates these into a verdict. · All 11 metrics