ACE'S GLOSSARY OF SELECTED TERMS
Net Income - is a company's total sales less total expenses (that is, expense factors for costs of doing business, depreciation, interest, taxes, and other expenses) for a specific period.
Net Worth - the amount by which a company's or individual's assets exceed their liabilities. For a company, this is known as shareholder's equity.
Operating Margin - is a variant of profit margin. It indicates how much out of every dollar of sales the company makes, before interest and taxes.
Price-Earnings (P/E) ratio - is a ratio of a company's current share price compared to its per-share earnings. The P/E ratio is a much better indicator of the value of a stock than the market price alone. In general, a high P/E means high projected earnings in the future. As such, the P/E ratio could be interpreted as the reflection of the market's optimism concerning a firm's growth prospects. To determine whether a particular P/E is high or low, take into account a company's growth rates; and the P/Es of other companies in the same industry. Historically, the average P/E ratio in the market has been around 15-25.
Price Growth - is the 52-week increase in the price of a stock. Its is displayed as a percentage. A price growth of 75% or more is considered excellent; 45% to 74.9% is good; 25% to 44.9% is average; and less than 25% is poor.
Profit Margin - is calculated as gross profits divided by sales. The margin measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful in comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to the competitors in the industry. Profit margin is displayed as a percentage. The higher the margin the better it is for the company. Investors can look at margins to assess the quality of a company. If a company is increasing its margin over time, it is earning more per dollar of sales.
Return on Assets (ROA) - is an indicator of how profitable a company is relative to its total assets. It is calculated by dividing a company's annual earnings by its total assets.
Return on Equity (ROE) -measures how well a company used reinvested earnings to generate additional earnings. It is equal to a company's after-tax income (after preferred stock dividends but before common stock dividends) for a fiscal year divided by book value. ROE indicates how much profit a company is able to generate given the resources provided by its stockholders.
Return on Investments (ROI) - measures how effectively the firm uses its capital to generate profit. It is calculated to a company's fiscal year income divided by common stock and preferred stock equity plus long-term debt.
Risk Level - An estimate of a stock's expected price volatility. Measured on a scale of 1 to 5, 1 being Low risk, 3 being Average risk, and 5 being High risk.
Sales, Gross - Total sales that is not adjusted for any other charges. It is determined by adding all sales invoices. Gross sales measures the amount of product that a company sells relative to its competitors. The magnitude of a company's sales figure is important as is the growth of the sales figure from year-to-year. Generally, a high sales figure is preferred than a lower figure. Also, a steady and appreciable growth in a company's total sales from one year to the next is a key indicator on how a company is able (or unable) to sustain and improve the utility of its products and services in the marketplace.
Sector, Business - Groupings of stocks depending upon the company's business. The market is broken up into several sectors. Some of these are the transportation, technology, health care, financial, basic materials, services, etc. sectors.
Share - Another name for a stock.
Shareholders' Equity - the amount of the company that is financed through common and preferred shares. Also known as share capital, net worth, or stockholders' equity.
Stock - A security instrument that signifies ownership in a corporation and represents a claim on a portion of the corporation's assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner the right to vote at shareholder meetings and to receive dividends that the company has declared. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. Also known as shares, or equity.
Stockholders' Equity - Often referred to as the book value of the company. Specifically, the balance sheet item that includes capital received from investors in exchange for stock, donated capital, and retained earnings.
Stop-limit Order - an order to buy or sell a quantity of a security at a specified price or better, but only after a specified price has been reached.
Traded Volume - is the actual number of shares traded daily. Volume could be used as a gauge of the demand for a stock. Average Volume is the n-day moving average of daily volume. ACE'S assigns an Excellent rating for +1,000,000 trading volumes; Good for 500,001-999,999 volumes; Average for 100,000 - 500,000 volumes; and Below Average for -100,000 volumes.
TTM - Trailing twelve months; an amount or figure that pertains to the past 12 months..
Value Stock - a stock that trades at a lower price relative to its dividends, earnings, sales, and similar fundamentals. As such, they are considered undervalued by certain investors.