Glossary

S&P 500: It is an unmanaged index of 500 common stocks, primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains.

Russell 1000 Value Index measures the performance of the large-cap value segment of the US equity universe.

Interest coverage ratio: It is a financial metric that shows a company’s ability to pay the interest on its outstanding debt. A higher ratio indicates the company has more than enough earnings to cover its interest payments, while a lower ratio may signal potential financial distress.

Altman Z-Score: It is a model designed to predict the likelihood of a company going bankrupt within the next two years. Created by American finance professor Edward Altman in 1968, the model is specifically designed for publicly traded manufacturing companies with assets greater than $1 million.

Equity-to-Asset ratio: It measures a company’s financial leverage by dividing its total shareholder equity by its total assets. It is calculated as total equity divided by total assets.

Piotroski F-Score: A nine-point scoring system that evaluates a company’s financial health by assessing nine criteria, with a score from 0 (weak) to 9 (strong). It identifies financially strong companies by looking at their performance in areas like profitability (positive net income, positive operating cash flow), leverage (decreased long-term debt), and liquidity (improved current ratio), often used to find value stocks.

EBITDA: It stands for earnings before interest, taxes, depreciation, and amortization. EBITDA margins can provide a lens into short-term operational efficiency. It can be useful for comparing companies that differ in terms of their investment, debt, and tax situations.

Intrinsic value: Value of an asset based on its tangible and intangible assets rather than market or book value.

Operating margin: The ratio of operating income (earnings before interest and taxes) to sales revenue. It represents the percentage of total revenue that a company retains from ordinary business activities, excluding expenses.

Mean operating margin (10-year mean profit margin): Is the average of the company’s operating margins over the past 10 years. It smooths out year-to-year swings to show a clearer picture of long-term profitability.

Operating Margin Growth: Is the annualized growth rate of the company’s operating margins.

5-year revenue growth rate: It measures how much a company’s revenue has increased per year on average over the past five years. It smooths out short-term fluctuations and shows the company’s longer-term growth trend.

3-year revenue growth rate: It measures how much a company’s revenue has increased per year on average over the past three years. It smooths out short-term fluctuations and shows the company’s longer-term growth trend.

Return On Equity (ROE): The percentage a company earns on its total equity for the time period listed. The calculation is net income divided by end-of-year net worth.

Price/Earnings-to-Growth (“PEG Ratio”): Is a stock’s P/E ratio divided by the growth rate of its earnings for a specified time period.

Price-to-Free-Cash-Flow Ratio (“P/FCF Ratio”): It compares a company’s market cap to its free cash produced. It’s calculated by dividing market capitalization by free cash flow from cash flow statement.

Tariff Resilience Score is a ranking system developed by GuruFocus to measure a company’s exposure to international trade tariffs, rated on a scale from 0 to 10. It takes into account key factors such as global supply chain dependencies, manufacturing locations versus sales markets, import / export balance and percentage of revenue, and more.

Earnings Per Share (EPS): A company’s total earnings divided by the current number of shares outstanding. EPS gauges the profitability of the company from the view of the shareholders.

Earnings Per Share without Non-Recurring Items is the amount of earnings without non-recurring items per outstanding share of the company’s stock. In calculating earnings per share without non-recurring items, the dividends of preferred stocks and non-recurring items need to subtracted from the total net income first.

Momentum: the momentum of a stock is the tendency for a stock’s price to continue moving in the same direction—up or down—over a certain period of time due to persistent investor behavior, market sentiment, and underlying trends.

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