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Liquidity Ratio
A measure of how much dollar trading volume is required to move a stock's price up or down by one percentage point. The ratio is calculated by adding the daily percentage changes of a stock's closing price for each trading day of the month. Absolute values are used — only the magnitude of change, and not the direction. Then the total dollar volume for the month is divided by this total-percentage-change figure.
A high ratio indicates a stock that requires relatively heavy trading to move its price. A low liquidity ratio indicates a stock that moves on relatively light volume.
Back to TopLong-Term Debt
Liabilities that are expected to be paid after 12 months from the date of the last balance sheet. A company's long-term debt could be in the form of bank debt, mortgage bonds, debenture bonds or other obligations.
Back to TopLong-Term-Debt/Equity Ratio
A measure of a company's leverage, calculated by dividing its long-term debt by its shareholders' equity, using figures from its most recently reported balance sheet.
The lower a company's debt/equity ratio, the less encumbered it is by debt. Whereas debt/capital ratios show debt relative to the value of things a company owns and the money it has borrowed, debt/equity ratios show debt relative to just the things it owns.
Back to TopLong-term-debt/Total-capital Ratio
A measure of a company's leverage, calculated by dividing its long-term debt by its total capitalization (preferred stock equity plus common stock equity plus long-term debt).
The lower a company's long-term-debt/total-capital ratio, the less encumbered it is by debt. Whereas debt/equity ratios show debt relative to the value of things a company owns, debt/capital ratios show debt relative to the things it owns and the money it has borrowed.
Back to TopMarket Value
The value the stock market assigns to a company's shares, calculated by multiplying its share price by its number of shares outstanding. Also called market capitalization, or market cap.
Stocks with market values of less than $1 billion are commonly called small caps, while those with market caps greater than $5 billion are called large caps. Those in between are called midcaps. These values, of course, are somewhat subjective, and change over time with the overall value of the market.
Back to TopNet Earnings
See net income.
Back to TopNet EPS
Net Earnings-Per-Share (EPS) is the portion of a company's net earnings allocated to each share of stock. It is calculated by dividing net earnings by common shares outstanding adjusted for the assumed conversion of all potentially dilutive securities. Securities having a dilutive effect may include convertible debentures, warrants, options and convertible preferred stock.
Back to TopNet Income
The income a company has left after adjusting for all costs and credits. Also called earnings, and sometimes called bottom-line results, since it appears at the bottom of companies' income statements.
Back to TopNet Margin
A measure of profitability after all costs, expenses and taxes have been paid. Net margin is calculated by dividing the sum of net earnings over the past four quarter by the sum of revenues over the past four quarters. The result is expressed as a percentage. Unlike operating margin, net margin can be affected by one-time credits and charges as well as accounting adjustments for past activities.
Back to TopOn-Balance Volume Index
This is the ratio of shares traded to upward price movement. It was developed to help spot stocks that have been moving higher on increasing volume — a sign that there is developing interest in the company on Wall Street. The calculation is a complicated one, but goes like this: The daily volume and price change for the latest four weeks are compared with the same data for the previous four weeks and then related to trading on days when the stocks price rose. The index will be higher for stocks that are moving up on increasing volume, and can be an indication of significant buying activity.
Back to TopOpen Price
The price of the security at the start of the current trading day.
Back to TopOperating Cash Flow
Cash produced by a company's operations, equal to net income plus depreciation and change in accounts payable, minus change in accounts receivable and change in inventories. Operating cash flow is useful for judging the quality of a company's earnings. If a company continuously produces strong earnings but negative operating cash flow, it's a sign that those earnings may be attributable more to accounting techniques than operations.
Back to TopOperating Income
The sum of revenues over the past four quarters minus the sum of operating expenses over the past four quarters.
Back to TopOperating Margin
A measure of profitability that considers only current operations. Operating margin is calculated by dividing the sum of a company's operating income over the past four quarters by the sum of its revenues over the past four quarters. The result is expressed as a percentage. Operating margin, unlike net margin, is not affected by one-time credits and charges or accounting adjustments for past activities.
Back to TopOther Current Assets
Typical accounts include prepayments, deferred charges and amounts (other than trade accounts) due from parents and subsidiaries. Also includes any other current assets that are not assigned to cash and equivalents, receivables or inventories.
Back to TopPayout Ratio
The percent of earnings-per-share (EPS) that was paid out as a dividend. It is calculated by dividing the quarterly dividend by the quarterly EPS and multiplying by 100.
Back to TopP/E (TTM)
See Trailing P/E ratio.
Back to TopPEG
Price/earnings-to-growth ratio. The PEG is calculated by dividing a stock's P/E by its projected long-term earnings growth rate. (SmartMoney.com PEGs use forward P/Es, and three-to-five-year growth rates.)
The PEG provides a snapshot of the relationships between three important stock attributes — share price, earnings per share and the rate at which those earnings are expected to grow. Generally speaking, the lower the PEG, the less expensive a stock is relative to its growth projections.
The PEG holds an advantage over the P/E ratio, in that it can be used to compare dissimilar companies, since it adjusts for differences in their growth rates. Note, though, that the long-term growth projections use to calculate PEG ratios should be considered approximations — earnings are difficult enough for analysts to predict in the near-term, to say nothing of three to five years from now.
Bargain growth investors often look for stocks with PEGs below 1.0, although the cutoff is somewhat arbitrary. (The PEG itself has little mathematical basis — for one thing, it divides a ratio by a percentage without first converting one to the other — but is nonetheless a popular and useful gauge.)
Back to TopPreferred Stock Equity
The amount of shareholders' equity attributable to the preferred stock issued of the parent company.
Back to TopPre-Market Price
The price per share of the last reported Pre-Market Trade.
Back to TopPre-market Trade
A stock trade that takes place before the regular trading session begins. See extended-hours trading.
Back to TopPrevious Close
The last trade price of a stock at the end of yesterday's trading session. This value is updated just before the opening of today's trading session.
Back to TopPre-Tax Margin
The profitability of a company before taxes are paid. The pre-tax margin is calculated by dividing pre-tax earnings by revenues and then multiplying by 100. The result is expressed as a percentage.
Back to TopPrice/Book
Latest closing share price divided by last reported book value per share, essentially a valuation measure that compares a company's share price with the value of its tangible assets. While most manufacturing companies trade according to their earnings potential rather than the value of their assets (making the PE and PEG ratios more relevant for valuing their shares), the price/book ratio is still widely used to asses banks and insurance companies.
Back to TopPrice/Cash Flow
The ratio of a stock's latest closing price divided by cash flow per share for the past 12 months.
Back to TopPrice/Sales
Latest closing price divided by trailing 12-month sales per share.
Like the P/E, the P/S is a valuation ratio. While earnings are one of the primary drivers of share price performance, many investors consider sales to be a more reliable measure of income, since they're less subject than earnings to accounting subjectivity. (Sales appear at the top of companies' income statements, before adjustments for things like depreciation and amortization have been made.
Generally speaking, the lower a company's P/S ratio is, the cheaper its shares appear, although other factors, like low profitability or the recent divesting of a revenue-generating business unit, can make a company's trailing P/S ratio look unusually low. P/S comparisons should be made between companies in like industries. The P/S ratio is particularly useful for evaluating stocks that have no earnings.
Back to TopPro Forma
Describes financial statements that deviate from generally accepted accounting principles, or GAAP, in order to provide meaningful comparisons or projections. Pro Forma earnings, for example, often exclude non-recurring charges such as goodwill amortization, and may include hypothetical assumptions, such as the closing of a proposed merger.
While pro-forma earnings are useful for determining whether a company has exceeded or missed analysts' estimates, they should be used with caution by investors. Companies that continuously show large discrepancies between their GAAP and pro forma earnings demonstrate that their "non-recurring" charges recur all too often.
Back to TopPro Forma Earnings Per Share
Pro forma earnings for the indicated period, divided by the weighted average number of common shares outstanding. See Pro Forma.
Back to TopP/S
See Price/sales ratio.
Back to Top