(REVT−COGS−(XSGA−XRD)−XINT) / (BE+MIB)
...
So, roughly: (net income + R&D) / equity
or, ROE + R&D/equity

In the right direction, but not that great an approximation - ROE would usually be after-tax after-depreciation after-everything income. The paper makes the case for using the most "gross" income metric available.

Minority interests are rarely a big factor and could probably be skipped.
So a simple version would be (Gross margin - [non-R&D SG&A expenses] - interest) / book

(meaning gross margin as a dollar amount, not percentage: total revenues minus cost of goods sold)

Anybody up to an SIpro implementation?
Personally, I'd want to include profit averaged over more than a year. A lot of very good firms have somewhat variable gross earnings.


If I used this as a screen to pick companies to invest in, I'd add a sanity test that their debt not be too high. A firm that paid out all its book value as unsupported dividends would have a small denominator and a big result.
I usually compare debt to [cyclically adjusted] net income...if it would take more than 5-10 years of profit to wipe out the debt, it's leveraged. Under 5 years is pretty much always safe, up to 10 for the very most reliable earners, and over that is too junky for me.

Jim