Holding-Company Look-Through Score

Install and import#

bash

npm install fintech-algorithms

import { holdingCompanyLookThroughScore } from "fintech-algorithms/fundamental-analysis-and-valuation/sector-specific-equity-scoring/holding-company-look-through-score";

Signature#

holdingCompanyLookThroughScore(data)

Looks through a holding company to its subsidiaries by scaling each holding's equity value, debt and dividends by the parent's ownership ratio, then bridges to parent NAV using parent cash, debt and other liabilities. Scores the NAV buffer, look-through leverage, dividend cover of parent interest, concentration, valuation freshness and listed coverage.

Parameters#

Name	Type	Notes
`data`	`RecordValue`	A plain object. `framework` must be the string `holding-company-lookthrough-teaching-v1`. `weights` must be an object holding exactly `nav_buffer`, `lookthrough_leverage`, `parent_coverage`, `diversification`, `freshness` and `listed_coverage`. `holdings` must be an array of at least two objects, each with a unique nonempty `id`, an `ownership_ratio` in (0, 1], nonnegative `equity_value`, `debt` and `dividends_to_parent`, and boolean `listed` and `stale` flags. `parent_cash`, `parent_debt` and `other_parent_liabilities` must be nonnegative and `parent_interest_expense` strictly positive. `parent_market_cap` is optional; when present it must be nonnegative. min_holdings: 2

Returns#

{ state: string; method: string; holding_ledger: Array<{ id: string; ownership_ratio: number; attributable_equity_value: number; attributable_debt: number; attributable_dividends: number; listed: boolean; stale: boolean }>; gross_asset_value: number; net_asset_value: number; attributable_subsidiary_debt: number; lookthrough_leverage: number; parent_interest_coverage: number; concentration_hhi: number; fresh_value_coverage: number; listed_value_coverage: number; discount_to_nav: number | null; component_scores: Record<string, number>; weights: Record<string, number>; look_through_score: number; coverage_ratio: number; reason: string }

holding_ledger restates each holding with its ownership-scaled equity value, debt and dividends. gross_asset_value is the summed attributable stake plus parent_cash; net_asset_value deducts parent_debt and other_parent_liabilities. lookthrough_leverage divides parent plus attributable subsidiary debt by the look-through enterprise value, and is 1 when that value is not positive. parent_interest_coverage divides attributable dividends by parent_interest_expense. concentration_hhi is the sum of squared value shares, and fresh_value_coverage and listed_value_coverage are the value shares of holdings not flagged stale and flagged listed. discount_to_nav is 1 less market cap over NAV, or null when parent_market_cap is absent or NAV is not positive. component_scores holds six band scores on a 0-100 scale and look_through_score is their weighted sum. state is nonpositive-nav-review when NAV is zero or negative, otherwise the band of the score: strong-review-band at 75 or more, mixed-review-band at 50 or more, weak-review-band below that. method is holding-company-lookthrough-score-v1 and coverage_ratio is 1.

Errors#

When data is not a plain object, or a holding entry is not an object — throws TypeError
When a holding id is not a nonempty string, or listed or stale is not a boolean — throws TypeError
When framework is not holding-company-lookthrough-teaching-v1 — throws RangeError
When holdings is not an array of at least two records — throws RangeError
When two holdings share an id — throws RangeError
When an ownership_ratio is outside (0, 1] — throws RangeError
When gross asset value is not positive — throws RangeError
When weights does not hold exactly the six component names, or its values do not sum to 1 within 1e-9 — throws RangeError
When a parent balance required to be nonnegative is negative, or parent_interest_expense is not positive — throws RangeError

Complexity: time O(n), space O(n).

Worked example#

executed Captured by running this function on the input its own test provides. Real output of real code — but not asserted against a published figure.

Input#

data

{
  "framework": "holding-company-lookthrough-teaching-v1",
  "holdings": [
    {
      "id": "listed-bank",
      "ownership_ratio": 0.62,
      "equity_value": 920,
      "debt": 540,
      "dividends_to_parent": 32,
      "listed": true,
      "stale": false
    },
    {
      "id": "private-logistics",
      "ownership_ratio": 0.8,
      "equity_value": 410,
      "debt": 180,
      "dividends_to_parent": 18,
      "listed": false,
      "stale": false
    },
    {
      "id": "listed-utility",
      "ownership_ratio": 0.35,
      "equity_value": 680,
      "debt": 390,
      "dividends_to_parent": 21,
      "listed": true,
      "stale": true
    }
  ],
  "parent_cash": 95,
  "parent_debt": 260,
  "other_parent_liabilities": 45,
  "parent_interest_expense": 24,
  "parent_market_cap": 760,
  "weights": {
    "nav_buffer": 0.22,
    "lookthrough_leverage": 0.22,
    "parent_coverage": 0.18,
    "diversification": 0.14,
    "freshness": 0.12,
    "listed_coverage": 0.12
  }
}

Call#

holdingCompanyLookThroughScore(data)

Returns#

object with 17 fields: state, method, holding_ledger, gross_asset_value, net_asset_value, attributable_subsidiary_debt, lookthrough_leverage, parent_interest_coverage, …

{
  "state": "mixed-review-band",
  "method": "holding-company-lookthrough-score-v1",
  "holding_ledger": [
    {
      "id": "listed-bank",
      "ownership_ratio": 0.62,
      "attributable_equity_value": 570.4,
      "attributable_debt": 334.8,
      "attributable_dividends": 19.84,
      "listed": true,
      "stale": false
    },
    {
      "id": "private-logistics",
      "ownership_ratio": 0.8,
      "attributable_equity_value": 328,
      "attributable_debt": 144,
      "attributable_dividends": 14.4,
      "listed": false,
      "stale": false
    },
    {
      "id": "listed-utility",
      "ownership_ratio": 0.35,
      "attributable_equity_value": 237.99999999999997,
      "attributable_debt": 136.5,
      "attributable_dividends": 7.35,
      "listed": true,
      "stale": true
    }
  ],
  "gross_asset_value": 1231.3999999999999,
  "net_asset_value": 926.3999999999999,
  "attributable_subsidiary_debt": 615.3,
  "lookthrough_leverage": 0.47398061406833814,
  "parent_interest_coverage": 1.7329166666666669,
  "concentration_hhi": 0.3791097100943457,
  "fresh_value_coverage": 0.7905667018655403,
  "listed_value_coverage": 0.7113692361844421,
  "discount_to_nav": 0.17962003454231423,
  "component_scores": {
    "nav_buffer": 92.05240647501488,
    "lookthrough_leverage": 39.115419095924864,
    "parent_coverage": 24.43055555555556,
    "diversification": 71.30895331236762,
    "freshness": 47.64167546638509,
    "listed_coverage": 58.767033740634595
  },
  "weights": {
    "nav_buffer": 0.22,
    "lookthrough_leverage": 0.22,
    "parent_coverage": 0.18,
    "diversification": 0.14,
    "freshness": 0.12,
    "listed_coverage": 0.12
  }
}

Showing 14 of 17 fields.

Other exports#

This module also exports calculate, bankFundamentalScore, insuranceFundamentalScore, reitFundamentalScore, utilityFundamentalScore, earlyStageLiquidityAndRunwayScore, cyclicalAndCommodityCycleNormalization, sectorSpecificWeightCalibration, unsupportedScopeAndCoverageDecision. Every module additionally exports run as an alias of its primary function, and a meta object carrying its catalog id, domain, family, shape and article URL.