Calculation
Recovery factor = Net profit / Max drawdown (both in absolute dollar or % terms).
A strategy that earned 80% total return with a -10% max DD has a recovery factor of 8.0. The same return with -40% max DD has a recovery factor of 2.0. Higher is better.
Limitations
Recovery factor is a point-in-time measure. It does not account for the path taken to earn the net profit. A strategy that produced all its return in a single year and then degraded would still show a high recovery factor if the drawdown occurred early.
For a more time-stable metric, use the Calmar ratio (CAGR / max DD) which normalises by time.