Glossary

Basic shares represent the actual number of shares in circulation.

Basic Outstanding Shares: The total number of shares currently held by shareholders, excluding any potential dilution from stock options, convertible securities, or warrants.

Diluted shares account for potential dilution that could occur if all convertible securities or options are converted into shares, which can reduce the value of each existing share.

Diluted Outstanding Shares: The total number of shares that would be outstanding if all potential sources of dilution (like stock options or convertible securities) were exercised.

A number that shows how much a stock’s price moves compared to the overall market(SP500). It measures risk. A beta above 1 means the stock is more volatile than the market, while a beta below 1 means it’s less volatile.

The ratio of a company’s current assets to its current liabilities. It measures the company’s ability to pay off short-term obligations with its short-term assets. A higher ratio indicates better liquidity and financial health. Great companies typically have a current ratio of 1.5 or higher. A ratio below 1 may signal potential liquidity problems.

The ratio of a company’s total debt to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It measures how easily a company can pay off its debt using its operating income. A lower ratio indicates better debt management and financial health. Great companies typically have a debt-to-EBITDA ratio of less than 3. A higher ratio may signal potential difficulties in managing debt.

The ratio of a company’s total debt to its shareholders’ equity. It measures how much a company relies on debt to finance its operations compared to using its own funds. A lower ratio generally indicates a safer financial position. Great companies often have a debt-to-equity ratio of less than 1. Ratios up to 3 can be acceptable for most industries, but anything higher may indicate excessive risk unless the company operates in a stable sector like utilities or real estate.

The total number of shares a company would have if all potential sources of dilution, like stock options, convertible securities, and warrants, were exercised.

Downward Trend: Can be caused by share buybacks, where a company repurchases its own shares, reducing the number of shares outstanding and increasing ownership for remaining shareholders. This is generally viewed positively as it signals confidence in the company’s future.

Upward Trend: Indicates an increase in shares outstanding, often due to stock options or convertible securities being exercised, which can dilute existing shareholders’ ownership.

The percentage of revenue left as free cash flow after all operating expenses and capital expenditures over the trailing twelve months (TTM). It shows how much cash a company generates that can be used for growth, dividends, or debt repayment. Great companies often have a free cash flow margin of more than 10%.

The percentage of revenue left after subtracting the cost of goods sold (COGS) over the trailing twelve months (TTM). It shows how efficiently a company produces its goods or services. A higher gross margin means the company keeps more profit from each dollar of revenue. Great companies often have a gross margin of more than 40%.

The ratio of a company’s interest expense to its operating cash flow. It measures how much of the company’s operating cash flow is used to pay interest on its debt. A lower ratio indicates better ability to cover interest payments with cash generated from operations. Great companies typically have an interest expense to operating cash flow ratio below 1. Ratios up to 3 can be acceptable in industries with stable, predictable cash flows, but anything higher may signal potential concerns with debt servicing.

The percentage of revenue left after subtracting operating expenses over the trailing twelve months (TTM). It shows how efficiently a company manages its operations. A higher operating margin means the company is better at turning sales into profit. Great companies often have an operating margin of more than 20%.

The percentage of revenue left as net income after all expenses, taxes, and costs over the trailing twelve months (TTM). It shows how much profit a company keeps from its revenue. Great companies often have a profit margin of more than 15%.

The ratio of a company’s liquid assets (current assets minus inventory) to its current liabilities. It measures the company’s ability to pay off short-term obligations using its most liquid assets. A higher ratio indicates better financial health and liquidity. Great companies typically have a quick ratio of 1 or higher. A ratio below 1 may indicate challenges in meeting short-term obligations without selling inventory.

The percentage of net income a company generates compared to its total assets over the trailing twelve months (TTM). It measures how efficiently a company uses its assets to produce profit. Great companies often have a return on assets (ROA) of more than 10%.

The percentage of net income a company generates compared to its shareholders’ equity over the trailing twelve months (TTM). It measures how efficiently a company uses investors’ money to generate profit. Great companies often have a return on equity (ROE) of more than 15%.

The percentage of net income a company generates compared to its invested capital (equity + debt) over the trailing twelve months (TTM). It measures how effectively a company uses all available capital to generate profit. Great companies often have a return on invested capital (ROIC) of more than 10%.

A form of payment where a company gives stock or stock options to employees instead of cash, aligning their interests with the company’s performance.

Downward Trend: Suggests a shift away from stock incentives, potentially due to improved cash flow, but may also impact the ability to attract talent.

Upward Trend: Indicates more reliance on stock incentives, which could dilute shareholder value or reflect difficulty in offering competitive cash compensation.