It gauges the likelihood of bankruptcy of a company. Financially stable company should possess a score of at least 1.8.
• B
Balance Sheet Accrual Ratio (BS Accrual Ratio)
It calculates the changes of Net Operating Assets compared to the average of the last 2 years. A too high or too low ratio indicates suspicipous manipulation of the accounting figures.
Beneish M-Score
It is a statistical model that checks if the reported earnings of a company have been manipulated. A positive value implies high likelihood of accounting fraud.
Book Value
Book value, or sometimes called as NTA, is the tangible net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities.
• C
Capital Expenditures (Capex)
Capital expenditures are funds used by a company to acquire or upgrade physical assets such as property, buildings or equipment. It can be categorized into two types of Capex, namely maintenance and growth.
Cash Yield (CY)
CY is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property.
Compounded Annual Growth Rate (CAGR)
CAGR is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s lifespan.
Current Ratio
It is the current assets divided by the current liabilities.
• D
Debt / Equity (D/E)
The ratio is used to evaluate a company's financial leverage. It reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn.
Debt Ratio
It is derived from the total debts devided by the total assets, expressed in percentage form.
Dividend / Price Yield (DY)
This is always compared against the bank's fixed deposit interest rate. A company with a decent dividend policy is the company that consistently pays out a DY of approximately twice the interest rate of fixed deposit.
• E
Earnings Before Minority Interest, Tax, Depreciation And Amortization (EBITDA)
EBITDA is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
Earnings Per Share (EPS)
EPS refers to the net profit divided by the total number of shares.
Earnings Yield (EY)
The earnings yield (which is the inverse of the PE) shows the percentage of a company's earnings per share.
Enterprise Value (EV)
EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company's balance sheet. Enterprise value is a popular metric used to value a company for a potential takeover.
Positive EPS Count Ratio
This ratio is computed by taking the occurrences of positive EPS years divided by the total number of annual report years. The higher the value, the better it is.
• F
Free Cash Flow (FCF)
Free cash flow is the cash left over after a company pays for its operating expenses and capital expenditures. It is the difference between OCF and Capex.
Positive FCF Count Ratio
This ratio is computed by taking the occurrences of positive FCF years divided by the total number of annual report years. The higher the value, the better it is.
• G
Graham's Max Price
Graham's Max Price is the maximum price he would offer to buy over a company's stock.
Geometric Mean
Geometric mean is the average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio. It is technically defined as "the nth root product of n numbers."
Greenblatt's Magic Formula
The Magic Formula investing approach was developed by Joel Greenblatt. The higher the value, the better is the company.
• K
Kelly's Criterion
It is a formula for estimating the winning odds, and how much we should bet.
• L
Liabilities
Liabilities refer to a company's obligations arising from past transactions such as the money it owes. All debts are liabilities, but not all liabilities are considered debts.
• M
Margin Of Safety (MOS)
A measure of how "cheap" a stock is, in relation to its intrinsic value. To mitigate potential investment losses, it is advisable to adopt a policy of at least 25% MOS before we decide to purchase a stock.
Market Capitalization
It is the product of the share price and the total number of shares issued.
Mind Map Flow Chart
This one of a kind Mind Map was an invention by Mr. Gan Kok Ann. It greatly simplifies the steps involved in determining if a stock is prestigious, and whether it is worth to own. The graphical presentation style assists user in making the right stock investment decision.
Moving Average (MA)
The reason for calculating the moving average of a stock is to help smooth out the price data by creating a constantly updated average price. By calculating the moving average, the impacts of random, short-term fluctuations on the price of a stock over a specified time-frame are mitigated. MA-200 which takes the last 200 trading days for calculation, is popular among traders.
• N
Net Current Assets
It is the difference between current assets and current liabilities.
Net Gearing Ratio
Gearing is a measurement of a company's financial leverage, and the net gearing ratio is one of the most popular methods of evaluating a company's financial fitness. It is calculated by dividing the total debt by the total shareholders' equity.
Net Income
Net income is calculated as revenue minus all costs and overhead expenses, prior to tax deduction.
Net Profit (Earnings)
Net profit refers to the after-tax net income.
Net Tangible Assets (NTA)
Net Tangible Assets, or widely known as the book value, is the value of all physical assets minus all liabilities.
• O
Operating Cash Flow (OCF)
It is the amount of cash generated by a company's normal business operations. OCF indicates whether a company can generate sufficient positive cash flow to maintain and grow its operations.
• P
Price / Book Ratio (PB)
The PB ratio measures the market's valuation of a company relative to its book value.
Price / Earnings Ratio (PE)
For any company that has a positive PE, this metric provides a rough estimate as to how long we will earn back the fund we invest in. For example, a stock with a PE value of 10 implies that we will earn back our invested fund in 10 years.
PE Growth (PEG)
This metric addresses the problem of ruling out high growth companies due to their high PE ratios. In this formula, the PE ratio is divided by the earnings growth. So even if a company has high PE ratio, as long as its earnings growth is higher, its PEG < 1 which means not expensive.
Piotroski F-Score
It is a discrete score between 0-9 that is used to determine the strength of a firm's financial position. The higher the score, the better it is.
• Q
Company Quality Score (Q-Score)
This indicator was invented by Mr. Gan Kok Ann. It is an effective way to gauge the overall quality of a company. Only those stocks with inherent Q-Score of above 60% are deemd to be of superior quality.
• R
Stock Rating
GSSS provides an avenue for subscribers to participate in judging the rating of a stock. This is carried out by means of assigning a rating which falls between 1 (worst) and 10 (best) inclusive. The higher a rating value is, the better is the stock as perceived by the user. Any stock without any valid rating assigned has a value of 0 (not assigned).
Relative Strength Index (RSI)
RSI measures the magnitude of recent price changes in order to evaluate overbought or oversold conditions. A RSI value of 70% or more means overbought ("expensive") while a RSI value of 30% or less implies oversold ("cheap"). A popular duration used is RSI-14, which measures the relative price strength in the last 14 trading days.
Retained Earnings
It is the amount of net income left over for the business after it has paid out dividends to its shareholders. The surplus is kept as reserve.
Return On Assets (ROA)
A measure of how efficient a company's management is at using its assets to generate earnings.
Return On Equity (ROE)
A measure of the capability and effectiveness of the management in creating profit for a company.
Return On Invested Capital (ROIC)
This metric is used to assess a company's efficiency at allocating the capital under its control to profitable investments. ROIC gives a sense of how well a company is using its money to generate returns.
• S
Shareholders' Equity
Shareholders' equity represents the net worth of a company, which is the amount that would be returned to shareholders if the company is dissolved, i.e. after its total assets are liquidated and debts are settled.
• T
Takeover Price
Takeover price is the reasonable price that an acquirer would pay up to buy over another company.
Total Shareholder Return (TSR)
TSR is the financial gain that results from a change in the stock's price plus any dividends paid by the company during the measured interval divided by the initial purchase price of the stock.
• V
Volume Weighted Average Price (VWAP)
VWAP is a financial term for the ratio of the value traded to total volume traded over a particular time horizon. The measure helps investors and analysts compare the current price of stock to a benchmark, making it easier for investors to make decisions on when to enter and exit the market.
• Z
Zulu Principles
The Zulu Principles were invented by Jim Slater, and use a combination of growth and value in pinpointing stocks worth to invest.
