Glossary · 165 terms
Fundamental Analysis
All fundamental analysis terms in the EquitiesAmerica.com glossary — plain-English definitions for American investors.
Accounts Receivable Turnover(AR turnover)
Accounts receivable turnover measures how efficiently a company collects its outstanding credit sales, calculated by dividing net credit sales by average accounts receivable, with a higher ratio indicating faster collection of payments owed by customers.
Accretion/Dilution Analysis(accretion dilution)
Accretion/dilution analysis measures whether a proposed acquisition will increase or decrease the acquiring company's earnings per share in the first full year following the transaction close, holding all other factors constant. An accretive deal increases pro forma EPS; a dilutive deal reduces it. This analysis is standard in U.S. investment banking and is routinely disclosed in merger proxy statements.
Adjusted Funds From Operations (AFFO)(AFFO)
Adjusted Funds From Operations (AFFO) refines the REIT earnings metric FFO by subtracting recurring capital expenditures required to maintain properties and making other adjustments for straight-line rent and lease incentives, providing an approximation of a REIT's true free cash flow available for dividends and growth.
All-In Sustaining Cost (Mining)(AISC)
All-In Sustaining Cost (AISC) is a standardized cost metric developed by the World Gold Council that captures the full per-ounce cost of sustaining gold (or silver) production at an existing mine, including direct mining costs, overhead, sustaining capital expenditures, and corporate expenses, enabling meaningful cost comparisons across gold mining companies.
Altman Z-Score(Z-Score)
The Altman Z-Score is a quantitative financial distress model developed by Professor Edward Altman in 1968 that uses five weighted financial ratios to predict the probability of a company entering bankruptcy within two years.
Analyst Estimate(consensus estimate)
An analyst estimate is a sell-side research professional's forecast of a company's future financial results — most commonly earnings per share and revenue — for an upcoming quarter or fiscal year. Consensus estimates, which average or aggregate the individual forecasts of multiple analysts, serve as the market benchmark against which actual reported results are measured.
Annual Recurring Revenue(ARR)
Annual Recurring Revenue (ARR) is the annualized value of all active subscription contracts at a point in time, providing a forward-looking measure of the predictable revenue base a subscription business can expect to generate over the coming twelve months.
ARPU (Average Revenue Per User)(Average Revenue Per User)
ARPU, or Average Revenue Per User, is the total revenue generated by a company over a given period divided by its average number of users or subscribers, expressing how much revenue each individual customer contributes on a per-period basis.
Asset Turnover(total asset turnover)
Asset turnover measures how efficiently a company generates revenue from its asset base, calculated by dividing net revenue by average total assets, with a higher ratio indicating more productive use of assets to produce sales.
Asset-Light Business Model
An asset-light business model is one in which a company generates revenue and earnings with minimal ownership of physical assets, relying instead on intellectual property, brand, software platforms, or contracted third parties to deliver its products or services. Asset-light businesses typically require less capital to grow, generate higher returns on assets, and convert a larger share of earnings into free cash flow.
Average Daily Rate (Hotels)(ADR)
Average Daily Rate (ADR) is the mean revenue earned per occupied room per night at a hotel or hotel company, representing the pricing dimension of hotel performance alongside occupancy rate in determining RevPAR.
Average Order Value(AOV)
Average Order Value (AOV) is the mean dollar amount spent by a customer per transaction on an e-commerce platform or marketplace, and it measures how effectively a business converts each shopping session into revenue by influencing basket size.
Average Revenue Per Subscriber (Telecom)(ARPU)
Average Revenue Per Subscriber (ARPU) is a telecommunications industry metric that measures the average monthly or annual revenue generated per subscriber on a wireless, broadband, or video service, used to track the monetization quality of a carrier's customer base and compare pricing power across operators.
Backlog
Backlog refers to the total value of orders or contracts that a company has received from customers but has not yet fulfilled, recognized as revenue, or delivered. In fundamental analysis, a large and growing backlog signals future revenue visibility, while a shrinking backlog may indicate weakening demand or competitive pressure.
Balance Sheet(statement of financial position)
The balance sheet is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of what the company owns, what it owes, and the residual interest of its owners.
Beneish M-Score(M-Score)
The Beneish M-Score is a statistical model developed by Indiana University professor Messod Beneish in 1999 that uses eight financial ratios derived from accounting data to estimate the probability that a company has manipulated its reported earnings, with scores above -1.78 suggesting a higher likelihood of manipulation.
Beta (Levered vs Unlevered)(asset beta)
Beta measures a stock's sensitivity to broad market movements; levered beta reflects the volatility observed in the market and includes the amplifying effect of financial leverage, while unlevered beta strips out the leverage effect to isolate the underlying business risk.
Book Value(net asset value)
Book value is the net asset value of a company as recorded on its balance sheet — total assets minus total liabilities — and represents the theoretical amount shareholders would receive if the company were liquidated at accounting values.
Book Value Per Share (Banking)(bank book value)
Book value per share for banks is total shareholders' equity divided by diluted shares outstanding, representing the net accounting value of the bank per share after subtracting all liabilities from assets, and serves as the primary valuation anchor for bank stocks given that bank assets are predominantly financial instruments carried near fair value.
Buffett Indicator(market cap to GDP ratio)
The Buffett Indicator is a macro valuation measure that compares the total market capitalization of all U.S. publicly traded stocks to U.S. Gross Domestic Product (GDP), named after Warren Buffett who described it in a 2001 Fortune magazine article as arguably the best single measure of where stock market valuations stand at any given moment.
Capital Expenditure(capex)
Capital expenditure (capex) is cash spent by a company to acquire, maintain, or upgrade long-term physical assets such as property, plant, and equipment, representing an investment that is capitalized on the balance sheet rather than immediately expensed.
Capital Structure(financial structure)
Capital structure describes the mix of debt, equity, and hybrid instruments a company uses to finance its assets and ongoing operations, determining both the cost of capital and the distribution of financial risk between creditors and shareholders.
Cash Conversion Cycle(CCC)
The cash conversion cycle (CCC) measures the number of days it takes a company to convert its investments in inventory and other resources into cash from sales, incorporating the time to sell inventory, collect receivables, and pay suppliers. A shorter or negative CCC indicates a business that generates cash quickly and with minimal working capital investment.
Cash Flow Statement(statement of cash flows)
The cash flow statement is one of the three core financial statements, showing all actual cash inflows and outflows over a reporting period, organized into operating, investing, and financing activities.
Cash Return on Capital Invested(CROCI)
Cash Return on Capital Invested (CROCI) is a cash-flow-based return metric developed by Deutsche Bank that measures the economic return generated on inflation-adjusted gross capital invested in a business, replacing accounting earnings with gross cash flow to provide a more accurate picture of true economic profitability across capital structures and accounting conventions.
Channel Check
A channel check is a primary research technique in which an analyst directly contacts customers, distributors, suppliers, or retailers to gather real-time intelligence about a company's business conditions ahead of formal earnings disclosures. Channel checks are a common differentiating tool in sell-side and buy-side fundamental research.
Churn Rate(customer churn)
Churn rate is the percentage of customers or subscribers who cancel or fail to renew their relationship with a company over a defined period, and it directly determines how fast a subscription business must replace lost revenue with new customer acquisition.
Combined Ratio (Insurance)(combined ratio)
The combined ratio is the primary profitability metric for property and casualty insurers, summing the loss ratio (claims paid as a percentage of premiums) and the expense ratio (operating costs as a percentage of premiums) — a combined ratio below 100% indicates underwriting profit.
Comparable Company Analysis(trading comps)
Comparable company analysis (comps) is a relative valuation method that values a business by applying the trading multiples of a peer group of similar public companies to the subject company's financial metrics.
Comparable Transaction Analysis(precedent transaction analysis)
Comparable transaction analysis is a valuation methodology that estimates the value of a company by examining the acquisition multiples paid in past transactions involving similar businesses. It is a standard component of investment banking fairness opinions and M&A buy-side and sell-side analysis in the United States.
Conglomerate Discount
The conglomerate discount is the valuation penalty the market applies to a diversified company whose operations span multiple unrelated industries, reflecting investor preference for focused, pure-play businesses and skepticism about the value of internal capital allocation across dissimilar business units. It is closely related to the sum-of-parts discount.
Consensus Estimate(Street estimate)
A consensus estimate is the average or median of all sell-side analyst forecasts for a specific financial metric — most commonly earnings per share or revenue — for a given reporting period, serving as the market's collective baseline expectation against which actual results are measured.
Content Spend (Streaming)(content investment)
Content spend refers to the amount a streaming or media company invests in producing and licensing original and third-party programming, representing the primary cost driver of the streaming business model and the main lever for attracting and retaining subscribers.
Conversion Rate(CVR)
Conversion rate in e-commerce and digital marketing is the percentage of visitors or prospects who complete a desired action — typically making a purchase — and it quantifies how effectively a platform turns traffic or leads into revenue-generating customers.
Cost of Debt(Rd)
Cost of debt is the effective interest rate a company pays on its borrowed funds, adjusted for the corporate tax deductibility of interest, and represents the debt component used in calculating the Weighted Average Cost of Capital.
Cost of Equity(Re)
Cost of equity is the return that equity investors require to compensate them for the risk of owning a company's shares, representing the opportunity cost of capital for equity-financed investments.
Current Ratio(current ratio)
The current ratio measures a company's ability to meet its short-term obligations using its short-term assets, and is a primary indicator of near-term liquidity health.
Customer Acquisition Cost(CAC)
Customer Acquisition Cost (CAC) is the total sales and marketing expenditure required to acquire one new paying customer, and it anchors the unit economics calculation that determines whether a business earns more from a customer relationship than it costs to create it.
DAU/MAU (Daily/Monthly Active Users)(Daily Active Users)
DAU/MAU, the ratio of Daily Active Users to Monthly Active Users, measures how frequently the average user engages with a product within a given month, serving as a proxy for the stickiness and habit-forming quality of a platform.
Days Sales Outstanding(DSO)
Days sales outstanding (DSO) measures the average number of days a company takes to collect payment after a sale has been made, calculated by dividing accounts receivable by revenue and multiplying by the number of days in the period. Rising DSO can signal deteriorating credit quality among customers, aggressive revenue recognition, or weakening competitive positioning.
Debt-to-Equity Ratio(D/E ratio)
The debt-to-equity ratio (D/E) compares a company's total debt obligations to its shareholders' equity, measuring the degree to which a company is financing its operations through borrowing versus owner funds.
Depreciation and Amortization(D&A)
Depreciation and amortization (D&A) are non-cash accounting charges that systematically allocate the cost of tangible and intangible assets over their useful lives, reducing reported earnings while leaving operating cash flow unaffected.
Discounted Cash Flow(DCF)
Discounted cash flow (DCF) is a valuation method that estimates the present value of an investment by projecting its future cash flows and discounting them back to today using an appropriate rate of return.
Dividend Discount Model(DDM)
The dividend discount model (DDM) values a stock by calculating the present value of all future dividend payments, based on the principle that a stock's intrinsic value equals the sum of its expected future cash distributions discounted at the required rate of return.
Dividend Yield(dividend yield)
Dividend yield measures the annual dividend payment as a percentage of the current stock price, showing how much income an investor receives for each dollar invested in a dividend-paying stock.
Drilling Rig Count(Baker Hughes rig count)
The drilling rig count is the number of oil and natural gas drilling rigs actively operating in a given region at a specific point in time, published weekly by Baker Hughes for North America and globally, and is widely tracked as a leading indicator of future oil and gas production growth and oilfield services industry demand.
DuPont Analysis(DuPont decomposition)
DuPont analysis is a framework that decomposes return on equity (ROE) into its three or five component drivers — profitability, efficiency, and leverage — allowing investors to identify the specific sources and sustainability of a company's return on shareholder capital.
Earnings Call
An earnings call is a quarterly conference call hosted by a publicly traded company during which management presents financial results, discusses business conditions, and answers questions from Wall Street analysts and institutional investors. In the United States, most S&P 500 companies hold earnings calls within a few weeks of each fiscal quarter ending.
Earnings Per Share(EPS)
Earnings per share (EPS) represents a company's net profit allocated to each outstanding share of common stock, and serves as the primary building block for most equity valuation metrics.
Earnings Quality(earnings reliability)
Earnings quality refers to the degree to which reported earnings accurately reflect the company's true, sustainable operating performance, free from accounting manipulation, non-recurring items, and aggressive or misleading accounting choices.
Earnings Revision
An earnings revision is a change in a sell-side analyst's published estimate for a company's future earnings per share or revenue, made in response to new information such as management guidance, industry data, competitor results, or macroeconomic developments. The direction and breadth of revisions across the analyst community is a widely followed signal in fundamental equity analysis.
Earnings Surprise(earnings beat)
An earnings surprise occurs when a company reports actual earnings per share that differ — positively or negatively — from the consensus estimate compiled by Wall Street analysts.
EBITDA(EBITDA)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, and is widely used as a proxy for operating cash flow and a key input in leveraged buyout (LBO) and M&A valuation.
Economic Value Added(EVA)
Economic Value Added (EVA) measures the dollar amount of value a company creates above and beyond the return required by its capital providers, calculated as Net Operating Profit After Tax minus a capital charge equal to the cost of capital multiplied by invested capital.
Efficiency Ratio (Banking)(bank efficiency ratio)
The efficiency ratio for banks measures non-interest expenses as a percentage of total revenue (net interest income plus non-interest income), indicating how many cents a bank spends to generate each dollar of revenue, where lower ratios reflect greater operational efficiency.
Embedded Value (Insurance)(EV insurance)
Embedded Value (EV) is a life insurance industry valuation metric that estimates the total present value of a life insurer's existing in-force policy portfolio plus its adjusted net asset value, capturing the current worth of future profits expected from policies already written, and serves as the primary intrinsic value benchmark for life insurance companies.
Enterprise Value(EV)
Enterprise value (EV) represents the theoretical total cost to acquire a business — including both equity and debt obligations, net of cash — and is used as a capital-structure-neutral measure of company size and value.
Equity Risk Premium(ERP)
The Equity Risk Premium (ERP) is the excess return that investing in the stock market provides over a risk-free rate, compensating investors for the higher volatility and uncertainty of equity ownership compared to holding default-free government securities.
EV/EBITDA(enterprise value to EBITDA)
EV/EBITDA is an enterprise value-based valuation multiple that divides a company's total enterprise value by its earnings before interest, taxes, depreciation, and amortization, enabling capital-structure-neutral comparisons across companies.
Exit Multiple Method(exit multiple)
The Exit Multiple Method estimates terminal value by applying a valuation multiple — most commonly EV/EBITDA — to the final projected year's financial metric, anchoring the terminal value to observable trading multiples of comparable public companies.
Expense Ratio (Insurance)(insurance expense ratio)
The Expense Ratio in insurance measures an insurer's operating expenses — underwriting costs, agent commissions, administrative costs, and marketing expenses — as a percentage of net written or earned premiums, reflecting the overhead cost to acquire and administer business, and combines with the loss ratio to form the combined ratio.
Finding and Development Cost(F&D cost)
Finding and Development Cost (F&D Cost) measures how much an oil and gas company spends per barrel of oil equivalent to add new proved reserves, calculated by dividing capital expenditures on exploration and development by the reserve additions achieved, serving as a key efficiency metric for E&P companies.
Fixed Charge Coverage Ratio(FCCR)
The fixed charge coverage ratio measures a company's ability to meet all of its fixed financial obligations — including interest expense, lease payments, and preferred dividends — from its operating earnings, providing a more conservative and comprehensive view of debt-servicing capacity than the interest coverage ratio alone.
Football Field Chart(valuation range chart)
A Football Field Chart is a horizontal bar chart used in investment banking and equity research to display the range of implied valuations derived from multiple methodologies side by side, visually illustrating where different approaches agree or diverge.
Forward Guidance
Forward guidance is management commentary about a company's expected future financial performance, typically provided during earnings calls or in press releases accompanying quarterly results. In U.S. equity markets, guidance — whether quantitative or qualitative — is treated as a primary input into analyst models and directly influences consensus estimates.
Forward P/E(NTM P/E)
The forward price-to-earnings ratio divides a stock's current share price by the consensus estimate of its earnings per share over the next twelve months, providing a valuation multiple based on expected rather than historical earnings.
Free Cash Flow(FCF)
Free cash flow (FCF) is the cash a company generates after paying for operating expenses and capital expenditures, representing the true cash available to return to shareholders, pay down debt, or fund acquisitions.
Funds From Operations (FFO)(FFO)
Funds From Operations (FFO) is the primary earnings metric used to evaluate real estate investment trusts (REITs), calculated by adding depreciation and amortization back to net income and excluding gains or losses on property sales, providing a clearer picture of a REIT's recurring cash-generating ability than GAAP net income.
Goodwill(acquisition goodwill)
Goodwill is an intangible asset recorded on a company's balance sheet that represents the excess of the purchase price paid in an acquisition over the fair value of the target's identifiable net assets.
Gordon Growth Model(constant-growth DDM)
The Gordon Growth Model is a simplified version of the dividend discount model that values a stock based on next year's expected dividend divided by the difference between the required rate of return and the assumed constant dividend growth rate.
Gross Margin(gross profit margin)
Gross margin measures the percentage of revenue retained after subtracting the direct costs of producing goods or services, and reflects a company's pricing power and production efficiency.
Gross Merchandise Value(GMV)
Gross Merchandise Value (GMV) is the total dollar value of goods and services transacted through a marketplace platform over a given period, representing the full economic activity flowing across the platform regardless of how much of that value the platform retains as revenue.
Gross Profit(gross income)
Gross profit is the amount of revenue remaining after subtracting the direct costs of producing goods or delivering services — known as cost of goods sold — and represents the pool of money available to cover operating expenses, interest, taxes, and ultimately generate net income for shareholders.
Guidance (Earnings Guidance)(forward guidance)
Earnings guidance is a company's forward-looking forecast of its own financial results — typically revenue and earnings per share — for the upcoming quarter or fiscal year, provided voluntarily to help investors calibrate expectations.
Intangible Assets(intangibles)
Intangible assets are non-physical assets that provide future economic benefits to a company, including patents, trademarks, customer lists, licenses, brand names, and proprietary software, recorded on the balance sheet when acquired in a transaction.
Interest Coverage Ratio(times interest earned)
The interest coverage ratio measures how many times a company's earnings before interest and taxes (EBIT) can cover its annual interest expense obligations, serving as a fundamental gauge of short-term debt-servicing capacity and a key metric in credit analysis to assess the risk of financial distress.
Internal Rate of Return(IRR)
Internal Rate of Return (IRR) is the discount rate that makes the Net Present Value of all cash flows from an investment equal to zero, representing the annualized compound return generated by the project.
Intrinsic Value(true value)
Intrinsic value is the true underlying worth of a business based on its future cash flow potential, and represents the price a rational, fully informed buyer would pay for the entire company — regardless of its current market price.
Inventory Turnover(stock turnover)
Inventory turnover measures how many times a company sells and replaces its inventory over a period, calculated by dividing cost of goods sold by average inventory, with a higher ratio generally indicating efficient inventory management and strong demand.
Leveraged Buyout Model(LBO model)
A leveraged buyout (LBO) model is a financial model used by private equity firms to evaluate acquiring a company using a combination of equity and a large amount of borrowed capital, with the acquired company's assets and cash flows serving as collateral and the primary source of debt repayment. The LBO model determines the maximum purchase price a financial buyer can pay while still achieving its target return on invested equity.
Lifetime Value (LTV)(LTV)
Lifetime Value (LTV) estimates the total revenue or gross profit a company expects to earn from a single customer over the entire duration of the relationship, providing a ceiling on how much it is economically rational to spend acquiring that customer.
Load Factor (Airlines)(load factor)
Load factor is the percentage of available seating capacity that is filled by paying passengers on airline flights over a given period, measuring how effectively a carrier converts deployed capacity into occupied seats.
Loan-to-Value Ratio (Banking)(LTV)
The Loan-to-Value Ratio (LTV) is the amount of a loan expressed as a percentage of the appraised value of the collateral securing it, most commonly used in mortgage lending, where a higher LTV indicates greater lender risk because there is less equity cushion to absorb a decline in the collateral value before losses occur.
Loss Ratio (Insurance)(claims ratio)
The Loss Ratio is a core profitability metric for property and casualty insurers that expresses incurred losses and loss adjustment expenses as a percentage of earned premiums, measuring how much of every premium dollar the insurer pays out in claims, with lower ratios indicating more profitable underwriting.
LTV/CAC Ratio(LTV to CAC)
The LTV/CAC ratio divides a customer's estimated lifetime value by the cost to acquire that customer, serving as the definitive unit economics benchmark for subscription and platform businesses — a ratio above 3x is generally considered the threshold for a healthy recurring-revenue model.
Margin of Safety(MOS)
Margin of safety is the discount between a stock's intrinsic value and its market price — the larger the gap in the investor's favor, the greater the protection against errors in analysis or unforeseen adverse developments.
Market Value Added(MVA)
Market Value Added (MVA) is the difference between a company's total market value (equity market cap plus net debt) and the total capital invested in the business, measuring the cumulative wealth created for all capital providers above the amount they originally contributed.
Medical Loss Ratio(MLR)
Medical Loss Ratio (MLR) is the percentage of health insurance premiums spent on medical claims and quality improvement expenses, with the Affordable Care Act mandating that most health insurers maintain MLR of at least 80% for individual and small-group plans and 85% for large-group plans.
Mine Life(reserve life)
Mine life is the estimated number of years a mine is expected to remain in operation based on its current proven and probable mineral reserves divided by the planned annual production rate, representing a fundamental indicator of an asset's longevity and a key input in mining company valuations.
Moat (Economic Moat)(economic moat)
An economic moat is a sustainable competitive advantage that allows a company to defend its market share and profitability against competitors over long periods, coined by Warren Buffett as an analogy to the water-filled moat protecting a medieval castle.
Modified Internal Rate of Return(MIRR)
Modified Internal Rate of Return (MIRR) addresses the flaws of standard IRR by explicitly specifying the reinvestment rate for positive cash flows and the financing rate for negative cash flows, producing a single, more realistic measure of an investment's compound annual return.
Modigliani-Miller Theorem(M-M theorem)
The Modigliani-Miller Theorem holds that, in a world without taxes, bankruptcy costs, or information asymmetry, a firm's total value is independent of its capital structure — meaning the choice between debt and equity financing does not affect what the enterprise is worth.
Monte Carlo Simulation (Valuation)(Monte Carlo analysis)
Monte Carlo Simulation applies random sampling across probability distributions for key input variables to generate thousands of possible valuation outcomes, producing a full probability distribution of enterprise value or share price rather than a single point estimate.
Monthly Recurring Revenue(MRR)
Monthly Recurring Revenue (MRR) is the normalized monthly value of all active subscriptions at a point in time, serving as the primary operating pulse metric for subscription businesses and the building block from which annual recurring revenue is derived.
Net Asset Value (REITs)(NAV)
Net Asset Value (NAV) for REITs is an estimate of the per-share market value of a real estate investment trust's property portfolio minus its liabilities, serving as a key valuation benchmark that allows investors to assess whether a REIT's stock is trading at a premium or discount to the underlying value of its real estate assets.
Net Dollar Retention(NDR)
Net Dollar Retention (NDR) measures the percentage of recurring revenue retained from existing customers over a period after accounting for expansions, contractions, and cancellations — a figure above 100% means that growth from existing customers alone exceeds all revenue lost to churn.
Net Income(net profit)
Net income is the profit remaining after all expenses — cost of goods sold, operating expenses, interest, taxes, and other charges — have been deducted from revenue, and represents the official 'bottom line' of the income statement.
Net Interest Margin (Banking)(NIM)
Net Interest Margin (NIM) is the difference between the interest income a bank earns on loans and investments and the interest it pays on deposits and borrowings, expressed as a percentage of average earning assets, measuring the core spread-based profitability of the banking business.
Net Margin(net profit margin)
Net margin, also called net profit margin, is the percentage of revenue that remains as net income after all expenses — including cost of goods sold, operating costs, interest expense, and income taxes — have been deducted, and is one of the most widely cited measures of overall profitability and pricing power.
Net Present Value(NPV)
Net Present Value (NPV) is the difference between the present value of an investment's future cash inflows and the present value of its cash outflows, measuring the dollar value created or destroyed by undertaking the investment at a given discount rate.
Net Promoter Score(NPS)
Net Promoter Score (NPS) is a customer loyalty metric derived from a single survey question asking customers how likely they are to recommend a company to others, producing a score from -100 to +100 that serves as a proxy for the strength of the customer relationship.
Netback (Energy)(operating netback)
Netback is a per-barrel profitability metric used by oil and gas producers that calculates the revenue received for a barrel of crude oil or natural gas equivalent after subtracting all costs from the wellhead to the point of sale, including transportation, royalties, production taxes, and operating expenses, representing the net cash margin per unit of production.
Occupancy Rate(occupancy)
Occupancy rate is the percentage of available rooms, seats, or capacity units that are filled during a given period, used across hotels, airlines, real estate, and other capacity-intensive industries to measure how efficiently physical or operational capacity is being utilized.
Operating Income(EBIT)
Operating income is the profit a company generates from its core business operations after deducting both cost of goods sold and all operating expenses — including selling, general and administrative costs, research and development, and depreciation and amortization — but before subtracting interest expense and income taxes.
Operating Margin(operating profit margin)
Operating margin measures the percentage of revenue remaining after all operating expenses — including cost of goods sold, selling, general and administrative costs, and R&D — have been paid, capturing the profitability of the core business before interest and taxes.
Ore Grade(gold grade)
Ore grade is the concentration of a valuable mineral or metal within mined rock, expressed as grams per tonne for gold and silver or as a percentage by weight for base metals like copper, and is one of the most critical determinants of a mine's economics because higher-grade ore produces more metal per tonne of rock processed at lower per-unit cost.
Organic Revenue Growth(organic growth)
Organic revenue growth measures the increase in a company's sales generated from its existing operations — excluding the impact of acquisitions, divestitures, and foreign currency translation — and is widely considered the most reliable indicator of whether a business is genuinely gaining competitive traction in its core markets.
Payback Period(payback)
The Payback Period is the length of time required for an investment's cumulative cash flows to equal the initial capital outlay, measuring how quickly an investor recoups their original investment without adjusting for the time value of money.
Payout Ratio(dividend payout ratio)
The payout ratio measures the proportion of a company's earnings paid out as dividends, indicating how much of profits are returned to shareholders versus retained for reinvestment in the business.
Pecking Order Theory(financing hierarchy)
Pecking Order Theory posits that companies prefer to fund new investments first with retained earnings, then with debt, and only as a last resort with new equity issuance, reflecting information asymmetry between managers and outside investors.
PEG Ratio(PEG ratio)
The PEG ratio adjusts the price-to-earnings ratio for expected earnings growth, helping investors determine whether a high-P/E stock is truly overvalued or simply priced to reflect superior growth prospects.
Perpetuity Growth Method(Gordon Growth Model)
The Perpetuity Growth Method estimates terminal value by treating the final year's free cash flow as the base of a perpetually growing stream, dividing the next period's cash flow by the difference between the discount rate and the assumed long-run growth rate.
Piotroski F-Score(F-Score)
The Piotroski F-Score is a nine-point scoring system developed by Stanford accounting professor Joseph Piotroski in 2000 that assesses a company's financial strength across three dimensions — profitability, leverage and liquidity, and operating efficiency — to identify financially improving companies trading at low price-to-book valuations that are likely to outperform.
Postpaid vs Prepaid (Telecom)(postpaid subscribers)
In wireless telecommunications, postpaid subscribers pay for service after use on a monthly billing cycle with credit checks and contractual commitments, while prepaid subscribers pay in advance without credit requirements or long-term obligations, with postpaid customers generating significantly higher average revenue and exhibiting substantially lower churn rates than prepaid customers.
PRASM (Passenger Revenue Per Available Seat Mile)(PRASM)
PRASM, or Passenger Revenue Per Available Seat Mile, measures airline revenue intensity by dividing total passenger revenue by the number of seat miles available for purchase, combining both pricing and demand volume into a single capacity-adjusted revenue metric.
Pre-Tax Income(EBT)
Pre-tax income, also called earnings before tax (EBT), is a company's total profit after all operating expenses and interest costs but before the income tax provision, and serves as the basis for calculating the effective tax rate and for comparing profitability across companies with different tax attributes or jurisdictions.
Precedent Transaction Analysis(transaction comps)
Precedent Transaction Analysis values a company by examining the acquisition multiples paid in prior M&A deals involving comparable businesses, capturing the control premium and strategic value buyers have historically paid above market prices.
Premium-to-Surplus Ratio (Insurance)(premium to surplus)
The Premium-to-Surplus Ratio measures the relationship between a property and casualty insurer's net written premiums and its policyholder surplus (net worth), indicating how much underwriting risk the insurer is taking on relative to its capital base, with regulators and analysts using it to assess whether an insurer is adequately capitalized for its volume of business.
Price-to-Book Ratio(P/B ratio)
The price-to-book ratio (P/B) compares a company's market capitalization to its book value (net assets), offering a measure of how much investors are paying above — or below — the accounting value of the firm's assets.
Price-to-Cash-Flow Ratio(P/CF ratio)
The price-to-cash-flow ratio compares a company's stock price to its cash flow per share, offering a valuation measure that is less susceptible to accounting adjustments than the price-to-earnings ratio.
Price-to-Earnings Growth Ratio(PEG ratio)
The price-to-earnings growth ratio (PEG ratio) adjusts a company's price-to-earnings multiple by dividing it by the expected earnings growth rate, providing a valuation metric that accounts for how fast earnings are growing. A PEG ratio of 1.0 is often used as a rough baseline for fair value in traditional fundamental analysis.
Price-to-Earnings Ratio(P/E ratio)
The price-to-earnings ratio (P/E) measures how much investors are willing to pay for each dollar of a company's earnings, and is one of the most widely used valuation metrics in fundamental analysis.
Price-to-Sales Ratio(P/S ratio)
The price-to-sales ratio (P/S) compares a company's market capitalization to its annual revenue, providing a valuation yardstick particularly useful for companies that are not yet profitable.
Pro Forma Financial Statements(pro forma earnings)
Pro forma financial statements are hypothetical financial projections that adjust historical or forecast results to reflect a specific event — such as an acquisition, divestiture, restructuring, or capital raise — as if the event had occurred at a different point in time. In U.S. M&A transactions, pro forma statements combining the acquirer and target are a standard disclosure in SEC filings.
Profitability Index(PI)
The Profitability Index (PI) is the ratio of the present value of an investment's future cash flows to its initial cost, measuring how much value is created per dollar of capital invested and providing a useful tool for ranking projects under capital rationing.
Proved Reserves (Energy)(1P reserves)
Proved reserves are the estimated quantities of oil, natural gas, or other hydrocarbons that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, and are the most critical asset metric for evaluating energy exploration and production companies.
Quality of Earnings Report(QoE report)
A quality of earnings report is a due diligence analysis that scrutinizes a company's reported financial results to determine how accurately and sustainably they reflect underlying business performance. It identifies one-time items, aggressive accounting choices, and working capital anomalies that may inflate reported earnings or obscure deteriorating cash generation.
Quality of Revenue(revenue quality)
Quality of revenue is a qualitative and quantitative assessment of how sustainable, recurring, predictable, and cash-generative a company's reported sales are, distinguishing between revenue streams that reliably convert to cash and earnings versus those that are one-time, contract-dependent, heavily discounted, or subject to significant reversal risk.
Quick Ratio(acid-test ratio)
The quick ratio (also called the acid-test ratio) measures a company's ability to meet short-term liabilities using only its most liquid assets — cash, marketable securities, and receivables — excluding inventory.
Real Options Valuation(real option analysis)
Real Options Valuation extends traditional DCF analysis by assigning explicit value to management's future flexibility — the ability to expand, delay, abandon, or switch investments in response to new information — using option pricing frameworks adapted from financial options theory.
Recurring Revenue(ARR)
Recurring revenue refers to the portion of a company's revenue that is contractually committed or highly predictable and expected to continue generating income in future periods without requiring a new sales effort for each transaction. Subscription fees, maintenance contracts, and licensing arrangements are common sources of recurring revenue in U.S. technology and software companies.
Refining Margin (Crack Spread)(crack spread)
A crack spread is the price differential between crude oil and the refined petroleum products derived from it — primarily gasoline and distillate fuels — representing the gross profit margin available to oil refiners per barrel processed, and is the central profitability metric for independent refining companies.
Replacement Cost(reproduction cost)
Replacement cost is a valuation approach that estimates what it would cost to build or acquire the productive assets of a business from scratch at current market prices, rather than buying the company as a going concern. When a company trades below its replacement cost, it may be cheaper for a competitor to acquire it than to replicate its asset base independently.
Reserve Replacement Ratio(RRR)
The Reserve Replacement Ratio (RRR) measures the percentage of an oil and gas company's annual production that it replaces through new reserve additions from exploration, acquisitions, or revisions, serving as a fundamental indicator of whether an E&P company is sustaining, growing, or depleting its asset base.
Residual Income Model(Edwards-Bell-Ohlson model)
The residual income model values a company's equity by adding the present value of future residual income — earnings in excess of the cost of equity capital — to the current book value of equity. Unlike discounted cash flow models, it anchors valuation to the accounting balance sheet and measures value creation through returns that exceed the minimum required by shareholders.
Return on Assets(ROA)
Return on assets (ROA) measures how efficiently a company uses its total asset base to generate net income, calculated by dividing net income by average total assets. It is a broad measure of capital deployment efficiency used to compare profitability across companies and industries in fundamental analysis.
Return on Equity(ROE)
Return on equity (ROE) measures how efficiently a company generates profit from its shareholders' equity, and is one of Warren Buffett's favorite indicators of business quality.
Return on Invested Capital(ROIC)
Return on invested capital (ROIC) measures how effectively a company generates profit from all the capital deployed in its business — both equity and debt — and is widely regarded as the gold standard for assessing business quality.
Revenue(net revenue)
Revenue is the total income a company earns from its primary business activities — selling products, providing services, or a combination of both — before any expenses are deducted.
Revenue Recognition(ASC 606)
Revenue recognition is the accounting principle and set of rules that determine when and how a company records revenue on its income statement, governed in the U.S. by ASC 606, which requires revenue to be recognized when (or as) control of goods or services is transferred to customers.
RevPAR (Revenue Per Available Room)(RevPAR)
RevPAR, or Revenue Per Available Room, is the primary performance metric for hotel operators, calculated by multiplying occupancy rate by the average daily rate, and it captures how effectively a hotel is filling its room inventory at profitable price points.
Same-Store Sales(comp-store sales)
Same-store sales (SSS), also called comparable-store sales or comps, measure the revenue growth generated by retail locations or restaurants that have been operating for a minimum period — typically 12 or 13 months — stripping out the effect of new store openings or closures.
Same-Store Sales (Comps)(comps)
Same-store sales, also called comparable-store sales or comps, measure the revenue growth or decline at retail locations that have been open for at least one full year, isolating the organic performance of the existing store base from the effect of opening new locations.
Scenario Analysis(scenario modeling)
Scenario Analysis is a valuation and planning technique that constructs multiple internally consistent sets of assumptions — typically a base case, bull case, and bear case — to estimate a range of possible outcomes for a company's value or financial performance.
Sell-Through Rate
Sell-through rate measures the percentage of inventory sold by a retailer or distributor within a given time period relative to the total inventory available at the start of that period. In fundamental analysis, sell-through rates are closely watched to assess real consumer demand and the risk of inventory buildup that can depress future orders and margins.
Sensitivity Analysis (Valuation)(what-if analysis)
Sensitivity Analysis in valuation tests how a model's output — typically enterprise value or share price — changes as individual input assumptions are varied one at a time, revealing which drivers have the greatest impact and the range of plausible outcomes.
Shiller CAPE Ratio(CAPE ratio)
The Shiller CAPE Ratio (Cyclically Adjusted Price-to-Earnings Ratio), also known as the P/E 10, is a valuation measure developed by Nobel laureate Robert Shiller that divides the current S&P 500 price level by the average of the prior 10 years of inflation-adjusted earnings, smoothing out business cycle fluctuations to produce a longer-term valuation context for U.S. equities.
Sloan Accrual Ratio(accrual ratio)
The Sloan Accrual Ratio, derived from Richard Sloan's 1996 paper on earnings quality, measures the proportion of a company's earnings that is attributable to accounting accruals rather than cash flows, with higher accrual ratios signaling lower earnings quality and historically predicting weaker subsequent stock returns.
Spectrum Holdings(wireless spectrum)
Spectrum holdings refer to a wireless carrier's licensed portfolio of radio frequency spectrum — the invisible airwaves over which wireless signals are transmitted — representing a critical and scarce infrastructure asset whose quantity, quality, and geographic coverage directly determine a carrier's network capacity, speed, coverage, and competitive positioning.
Stub Value
Stub value is the implied value of a parent company's remaining core business after subtracting the market value of a publicly traded subsidiary it owns. If the market is assigning a negligible or negative implied value to the parent's own operations, that stub is often cited as a potential valuation anomaly or investment opportunity.
Subscriber Count(subscribers)
Subscriber count is the total number of paying or active subscribers to a service at a point in time, serving as the primary scale metric for subscription-based businesses ranging from streaming platforms to telecommunications carriers and digital media companies.
Sum-of-Parts Discount(conglomerate discount)
The sum-of-parts discount describes the phenomenon where a diversified or conglomerate company trades at a lower aggregate valuation than the sum of its individual business segments would be worth if each were independently listed or sold separately. Closing this discount is a common rationale offered for corporate spinoffs and divestitures.
Sum-of-the-Parts Valuation(SOTP)
Sum-of-the-parts (SOTP) valuation is a method of appraising a diversified company by separately valuing each business segment and then summing those values to arrive at the total enterprise value.
Take Rate(platform fee rate)
Take rate is the percentage of Gross Merchandise Value or total transaction volume that a marketplace platform retains as its own revenue, serving as the primary measure of how effectively a platform monetizes the economic activity it facilitates.
Tangible Book Value(TBV)
Tangible book value is a measure of a company's net asset value that excludes intangible assets such as goodwill, patents, and trademarks, reflecting only the physical and financial assets that could be liquidated or transferred to another owner in a sale or liquidation scenario. It is most commonly used in valuing financial institutions and asset-heavy businesses.
Tangible Book Value Per Share(TBV per share)
Tangible Book Value Per Share (TBV) is book value per share adjusted to exclude intangible assets such as goodwill, customer lists, and core deposit intangibles, providing a more conservative measure of a bank's or financial institution's per-share net asset value based solely on hard, tangible assets.
Terminal Value(TV)
Terminal value is the estimated worth of a business at the end of a DCF model's explicit forecast period, capturing the present value of all cash flows expected beyond that horizon and typically representing the majority of the total enterprise value in most valuations.
Texas Ratio (Banking)(Texas bank ratio)
The Texas Ratio is a bank credit quality metric that compares a bank's non-performing assets — loans past due, in nonaccrual status, or repossessed properties — to its tangible common equity plus loan loss reserves, with a ratio approaching or exceeding 100% historically associated with significantly elevated risk of bank failure.
Tier 1 Capital Ratio(Tier 1 ratio)
The Tier 1 Capital Ratio is a measure of a bank's core capital — primarily common equity and retained earnings — as a percentage of its risk-weighted assets, and is the primary regulatory capital adequacy metric used by U.S. and global bank supervisors under Basel III standards to assess whether a bank has sufficient high-quality capital to absorb unexpected losses.
Tobin's Q(Q ratio)
Tobin's Q is a macroeconomic valuation ratio developed by economist James Tobin that compares the total market value of a firm or market to the replacement cost of its assets, with a ratio above 1.0 historically suggesting that the market valued assets more than it would cost to reproduce them and below 1.0 suggesting the opposite.
Trade-Off Theory (Capital Structure)(static trade-off theory)
Trade-Off Theory holds that firms choose an optimal capital structure by balancing the tax benefits of debt — specifically the interest tax shield — against the costs of financial distress, arriving at a leverage ratio where firm value is maximized.
Trailing P/E(TTM P/E)
The trailing price-to-earnings ratio divides a company's current share price by its actual reported earnings per share over the most recent twelve months, offering a valuation multiple grounded entirely in audited historical results.
Weighted Average Cost of Capital (WACC)(WACC)
Weighted Average Cost of Capital (WACC) is the blended rate a company is expected to pay on average to all its capital providers — debt holders and equity holders — weighted by the proportion each source represents in the total capital structure.
Whisper Number
A whisper number is an unofficial earnings per share expectation that circulates informally among traders and investors, often diverging from the published Wall Street consensus estimate. The whisper number represents the market's actual embedded expectation — what a stock needs to report to avoid a sell-off — rather than the average of formally published analyst forecasts.
Working Capital(net working capital)
Working capital is the difference between a company's current assets and current liabilities, representing the short-term liquidity buffer available to fund day-to-day operations.