We investigate the sustainable growth rate and DuPont components for asset pricing and portfolio performance evaluation. Employing data from 1990 through 2012 and a three-component DuPont ROE, we present evidence indicating that long short investment strategies based on sustainable growth rate, ROE, profit margin, and asset turnover yield significant positive alphas while long-short investment strategies based on the equity multiplier yield significant negative alphas. Surprisingly, the long-short portfolios based on equity multiplier produced significant alpha even in the following two quarters.
