Stock-Based Compensation Ratio

Calculate the stock-based compensation (SBC) to revenue ratio, an efficiency ratio that measures how much of a company’s revenue is being used to compensate employees through non-cash equity awards.

A high or rising SBC-to-revenue ratio is a common quality-of-earnings flag, particularly for technology companies, since SBC is added back in cash flow from operations but represents real economic dilution for shareholders.

The formula is as follows:

Also known as: SBC intensity, equity compensation ratio.

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Calculate the Stock-Based Compensation Ratio in Python

The Stock-Based Compensation Ratio is available in the Ratios module of the open-source Finance Toolkit. Install it with:

pip install financetoolkit -U

Then call get_stock_based_compensation_ratio as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(["AAPL", "TSLA"], api_key="FINANCIAL_MODELING_PREP_KEY")

sbc_ratios = toolkit.ratios.get_stock_based_compensation_ratio()

Which returns:

Parameters

get_stock_based_compensation_ratio accepts the following parameters:

• rounding (int, optional): The number of decimals to round the results to. Defaults to 4.
• growth (bool, optional): Whether to calculate the growth of the ratios. Defaults to False.
• lag (int | str, optional): The lag to use for the growth calculation. Defaults to 1.
• standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
• trailing (int): Defines whether to select a trailing period. E.g. when selecting 4 with quarterly data, the TTM is calculated.

Related Efficiency Ratios

The Ratios module page introduces the module, and the sidebar lists all of its functions.