Related: A Smart Beta ETF That Targets Natural Monopolies

Valuing high quality value is particularly important as bull markets enter their waning stages, as some market observers believe the current bull market is doing. In the early stages of bull markets, lower quality companies see their shares soar. However, as the bull matures, investors often exhibit a preference for higher quality fare with more compelling valuations.

Profitability measures the efficiency of a business in terms of how well it can produce a return on investment. Consequently, an observer would look at a company’s ROA to gauge profitability as it is calculated by dividing net income by total assets and measures how well a firm deploys its assets to generate earnings, so those with higher ROAs are considered more profitable.

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