Price-to-Sales Ratio (P/S Ratio)
Definition: A valuation metric comparing a company's market capitalization to its annual revenue.
Context for Advisors: Useful for evaluating companies not yet profitable. Lower values may suggest undervaluation, but it is most useful when comparing within industries. Particularly valuable for growth companies or sectors with thin margins.
Price-to-Earnings Ratio (P/E Ratio)
Definition: A valuation metric comparing a company's share price to its earnings per share.
Context for Advisors: Higher P/E ratios often reflect growth expectations. Most useful when compared to industry peers and historical averages. Not meaningful for companies with negative earnings.
Price-to-Book Ratio (P/B Ratio)
Definition: A valuation metric comparing a company's market price to its book value per share.
Context for Advisors: Particularly useful for evaluating financial companies and asset-heavy businesses. Values below 1 may indicate undervaluation or potential problems. Less relevant for companies with significant intangible assets.
PEG Ratio
Definition: The P/E ratio divided by the annual EPS growth rate.
Context for Advisors: Factors growth into valuation assessment. Generally, values below 1 suggest potential undervaluation relative to growth. Helps distinguish between appropriately valued high-growth companies and overvalued ones. Not as meaningful for companies with negative earnings.
Forward PEG Ratio
Definition: Similar to PEG ratio but uses projected future earnings and growth rates.
Context for Advisors: More forward-looking than standard PEG. Based on analyst consensus estimates. Subject to forecast accuracy but provides insight into expected value relative to growth.
Market Cap
Definition: The total market value of a company's outstanding shares.
Context for Advisors: Categorizes companies as large-cap, mid-cap or small-cap. Indicates company size, stability, and risk profile. Important for portfolio diversification across different market capitalizations.
Earnings Per Share (EPS)
Definition: The portion of a company's profit allocated to each outstanding share of common stock.
Context for Advisors: Fundamental measure of profitability on a per-share basis. Growth in EPS over time is typically a positive indicator.
Average Volume (3 months)
Definition: The average number of shares traded daily over the most recent 3 months.
Context for Advisors: Indicates trading liquidity and market interest. Higher volume often correlates with easier execution of large trades.
Revenue Growth (Year-over-Year)
Definition: The percentage increase in a company's revenue from one period to another.
Context for Advisors: Indicates top-line growth and market share gains. Important for evaluating early-stage companies. Should be assessed alongside profitability metrics for mature companies.
Net Income Growth
(Year-over-Year)
Definition: The percentage increase in a company's net income from one period to another.
Context for Advisors: Measures bottom-line growth after all expenses and taxes. More directly tied to shareholder value than revenue growth. Can be volatile due to one-time items and accounting adjustments.
Operating Income Growth
(Year-over-Year)
Definition: The percentage increase in a company's operating income from one period to another.
Context for Advisors: Focuses on core business profitability before interest and taxes. Less affected by financing decisions than net income. Helps evaluate management's operational effectiveness.
Quick Ratio
Definition: A measure of a company's short-term liquidity, calculated using quick assets (excluding inventory) and current liabilities.
Context for Advisors: More conservative liquidity measure than current ratio. Values greater than 1 suggest good short-term financial health. Particularly important during challenging economic environments.
Earnings Yield
Definition: The inverse of the P/E ratio, expressed as a percentage.
Context for Advisors: Represents earnings as a percentage return on investment. Allows direct comparison with bond yields and interest rates. Higher yields may indicate better value. Useful for comparing equities to fixed-income investments.