Value and Profitability/Quality: Complementary Factors -
In his 2012 paper “The Other Side of Value: The Gross Profitability Premium,” Robert Novy-Marx demonstrated that profitability, as measured by gross profits-to-assets, had roughly the same power as book-to-market (value factor) in predicting the cross-section of average returns - profitable firms generated significantly higher returns than unprofitable firms despite having significantly higher valuation ratios.| Alpha Architect
