Friday, 23 March 2018
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Stock Box Glossary

A glossary of STOCK BOX terms

For an explanation on how to use the STOCK BOX click here.

  • FY1 –The first upcoming fiscal year. FY0 means the last reported fiscal year. FY-1, FY-2 and FY0 are actual numbers while FY1, FY2, FY3 etc. are future forecasted numbers. For example, the photos in this glossary are taken from the CBA STOCK BOX which has its year-end in June 2018. If today is the 22nd of March 2018, FY0 is the fiscal year ended June 2017 and numbers in that column are factual from that annual report, and FY1 is for the current fiscal year ended June 2018.
  • Yr End – The date the company reports its year-end.
  • ROE – Return on equity. Net income as a percentage of shareholder equity invested or simply, how many cents the company makes in earnings for every dollar you invest in them. Good companies have high ROEs, consistency and growth.
  • EPS – Earnings per share is the earnings/number of ordinary shares. It is an indicator of the company’s profitability specific to each investor. Accountants can do a lot to manipulate this number so be careful. Again consistency and growth are key.
  • PE – Price to earnings ratio or price multiple is the price per share/earnings per share. This looks at how expensive the stock is or the dollar amount you must invest to receive one dollar in earnings. A high PEx over 30 is considered an expensive stock while a low value is considered a cheap stock.
  • Yield – Dividend yield. Dividend amount per share as a percentage of the company’s share price. An investor looking for an income stock would be looking for a high and stable yield above 5%. However, they yield is subject to if the stock is franked and may not be the whole picture.
  • Gross Yield – Dividend yield before deductions of tax and expenses (franking).
  • Div Cover – Ratio of company’s net profits to total dividend paid to shareholders. 1x means all the net profits were paid out as a dividend or 100 means 1% of net profits were paid out as dividends.
  • Payout Ratio – Dividends per share/earnings per share. If 100%, then all earnings were paid as dividends.
  • Peg Ratio – Price-earnings ratio (PEx)/EPS growth. Provides a more complete picture than PEx. A PEG ratio below 1 is desirable as the lower the PEG ratio, the more growth the company is forecast to have. For more on PEG ratios click here.
  • Price To Book – Book value per share. The value of total reported equity/total shares at the last fiscal year end.
  • Franking – 100% means the dividend is fully franked and the company has paid its full tax amount on the dividend. If the shareholder’s tax rate is lower, they will receive a tax credit.
  • ROA – Return on Asset. Equals net income/net assets. Measures how efficient a company’s management is at using its assets to generate earnings.
  • NTA – Net tangible assets. Value of the company’s physical assets (so excluding goodwill) minus any liabilities. This is displayed on a per share basis.
  • Gearing – Proportion of company’s debt/equity. 70% means the debt levels are 70% of its equity levels. High gearing ratios leave a company could be more susceptible to unforeseen events.
  • Mean Target Price – Average broker target price.
  • Target Price High/Low - Lowest and highest broker target prices currently.
  • Beta - How volatile the share price moves in relation to market movement. Beta of 1 means the stock price moves with the market, less than 1 means the stock price is less volatile than the market and more than 1 means it is more volatile than the market.
  • 52 Week High/Low – Highest and lowest price the share has reached in the last year to date.
  • Volatility – A measure of fluctuation in the share price. Higher volatility is riskier.
  • ATR – Average True Range is a measure of volatility. Higher ATRs mean higher price volatility, lower ATRs mean lower price volatility.
  • RSI – Relative Strength Index is a momentum indicator. Evaluates the strength of recent price performance to determine if it is oversold or overbought. If it crosses back up through 30, this indicates moving from oversold to neutral state showing positive momentum and is a buy signal. Similarly, if it moves from above to below 70, this indicates moving out of an overbought state with negative momentum and is a sell signal. Weekly RSI uses weekly price movements and is more reliably used to determine momentum.

STARMINE RANKINGS – From 1-100. 100 is the best in green and 1 the worst in red. Designated by StarMine and subsidiary of Thompson Reuters. We use them as a general ‘good or bad’ indication and try to just gauge the overall colour of the entire section. Here are their definitions.

  • Earnings quality - The StarMine earnings quality (EQ) model favours stocks whose earnings are backed by cash flows and other sustainable sources and penalises those driven by accruals and other less sustainable sources.
  • Value-momentum - The StarMine value-momentum (VAL-MO) model is a combination of 4 other StarMine models. Two are valuation models (StarMine intrinsic valuation and StarMine relative valuation), and two are momentum models (StarMine analyst revisions model and StarMine price momentum)
  • Price-momentum - The StarMine price momentum (PRICE MO) model leverages the tendency of long-term trends in returns to continue and the tendency of short-term trends to revert. The model also incorporates industry-level price momentum and the degree of consistency, or volatility, in prior returns.
  • Credit ranking – The StarMine combined credit risk model (CCR) incorporates 3 of its other models (StarMine structural uses structural leverage, asset volatility and asset drift, smartratios uses profitability, leverage, coverage, liquidity and growth and stability, and text mining uses transcripts, news and filings) into a final estimate of corporate credit risk.
  • Trend of forecasts - The StarMine analyst revisions (ARM) model aims to predict future changes in analyst sentiment. It overweights more accurate analysts and the most recent revisions and provides a more holistic portrait of analyst sentiment and a better predictor of future changes.
  • Intrinsic valuation - The StarMine intrinsic valuation (IV) model ranks companies based on their intrinsic value. High (low) scores represent stocks that are undervalued (overvalued). The model accounts for the systematic biases in sell-side estimates. Namely, the faster the expected growth rate, the more optimism bias. And, farther out estimates are more optimistically biased than nearer ones.
  • Relative valuation - The StarMine relative valuation (RV) model blends valuation ratios and includes both reported actuals and the proprietary smartestimates for fy1 and fy2. Forward estimates are over-weighted relative to actuals where analyst estimates have historically been most accurate and under-weighted for measures where estimate error is typically highest.
  • Insto interest – A model that ranks stocks based on the expected future increase, or decrease, in institutional ownership. Institutions show high conviction in buying companies with particular characteristics, whether that be pe or yield or balance sheet strength. The model analyses the purchasing profile of each fund and ranks stocks according to their collective institutional appeal.
  • Predicted surprise - The predicted surprise % is the percentage difference between the smartestimate and the i/b/e/s consensus estimate. When smartestimates diverge significantly from consensus, it serves as a leading indicator of the direction of future revisions and/or surprises. This indicator gets earnings surprises directionally correct 70% of the time. Smartestimates are created by excluding stale estimates and data errors, then weighting the remaining estimates based on each analyst’s track record.
  • Trend – Short – Reflects only the short term aspect of the price momentum model.
  • Trend – Medium – Reflects medium term aspect of the price momentum model.
  • Trend – Long – Reflects long-term aspect of the price momentum model.
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