Our glossary is a collection of the terminology used in this website and in our Verdia Investing Alerts and investment analysis.
52 Week High / Low
A 52-week high/low is the highest and lowest price at which a stock has traded during the previous year. It is a technical indicator used by some traders and investors who view the 52-week high or low as an important factor in determining a stock's current value and predicting future price movement. A stock that is trading below its 52-week high can be a good indicator of potential share price appreciation.
Cash
Cash (or Free Cash Flow) represents the cash a company generates after all cash outflows to support it’s operations and maintain its capital assets. We like to see Free Cash Flow 10-year historical growth at 10% or greater.
current Price
The Current Price is the actual current selling price of a security trading on an exchange. On a stock exchange, the current price of a security is determined by the last amount that was paid by an investor during a trade. The current price does not dictate the next sale price because changes to the supply and demand associated with the security will shift prices accordingly. We invest in companies where the Current Price of their stock is at or below our calculated Value Price. This ensures we are buying a company’s stock at at least a 50% discount.
Debt
Debt (or Long-Term Debt) is the amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date. We like to invest in companies with little to no debt. In the case a company does have some Long-Term Debt they should be able to pay off that debt within 3 years or less using their current Free Cash Flow.
Earnings
Earnings typically refer to after-tax net income, sometimes known as the bottom line, or a company's profits. Earnings are the main determinant of a company's share price, because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run. Earnings are perhaps the single most important and most studied number in a company's financial statements, because they show profitability compared with analyst estimates and company guidance. They can also be used to compare a company's performance over time and relative with its competitors and industry peers. Companies typically report earnings on both a quarterly and annual basis. Earnings announcements are official public statements of a company's profitability for a specific time period. An earnings announcement typically occurs on a specific date during earnings season and is preceded by earnings estimates.
EPS
Earnings per share (EPS) is the portion of a company's profit allocated to each share of common stock. Earnings per share serves as an indicator of a company's profitability. The earnings per share value is calculated as the net income (AKA profits or earnings) divided by the available shares. EPS tells us how much a company is profiting per share of ownership. We like to see the EPS 10-year historical growth at 10% or greater.
EQUITY
Equity is typically referred to as Shareholder Equity which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off. Equity is found on a company's balance sheet and is one of the most common financial metrics employed by analysts to assess the financial health of a company. Shareholder equity can also represent the book value of a company. We like to see Equity 10-year historical growth at 10% or greater.
exchange
An exchange is a marketplace where securities are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies a platform from which to sell securities to the investing public. The more prominent exchanges include the New York Stock Exchange (NYSE) and the Nasdaq.
Growth
Growth, along with Price and Technicals is one of the 3 primary areas that we analyze in order to identify the best companies to invest in. We like to see 10-year historical growth at 10% or greater in areas such as Sales, Cash, EPS, Equity, and ROIC.
Growth Rate
Growth rates refer to the percentage change of a specific variable within a specific time period and given a certain context. We like to see a company’s historical growth rates (Sales, Cash, EPS, Equity, ROIC) of 10% or higher for the previous 10 years.
Industry
An industry is a group of companies that are related based on their primary business activities. There are dozens of industry classifications, which are typically grouped into larger categories called sectors. Individual companies are generally classified into an industry based on their largest source of revenue.
Market Cap
Market capitalization refers to the total dollar market value of a company's outstanding shares. Commonly referred to as "Market Cap", it is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures. Using market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk. Large-cap companies typically have a market capitalization of $10 billion or more. These large companies have usually been around for a long time, and they are major players in well-established industries. Mid-cap companies generally have a market capitalization of between $2 billion and $10 billion. Small-cap companies generally have a market capitalization of between $300 million to $2 billion.
Market price
Our proprietary stock price calculation that suggests the price at which a stock should be selling.
PE
The Price-to-Earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). To determine the P/E value, simply divide the current stock price by the earnings per share (EPS).
Price
Price, along with Growth and Technicals is one of the 3 primary areas that we analyze in order to identify the best companies to invest in. We aim to invest in companies where their Current Price is at or below our calculated Value Price. This ensures we are buying a company’s stock at at least a 50% discount.
ROIC
Return on Invested Capital (ROIC) is a calculation used to assess a company's efficiency at allocating the capital under its control. The return on invested capital (ROIC) growth rate is the rate of return a business makes on the cash it invests in itself each year. We like to see ROIC 10-year historical growth at 10% or greater.
Sales
The amount of total yearly revenue that a company generates from the sale of its products and services. We like to see Sales 10-year historical growth at 10% or greater.
Sector
A sector is an area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics. Dividing an economy into different sectors allows for more in-depth analysis of the economy as a whole.
Stop Orders
A stop order is an order placed with a broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. For example, setting a stop-loss order for 3% below the price at which you bought the stock will limit your loss to 3%. Once the stock falls 3% below the price at which you bought, your shares will then be sold at the current market price.
A stop-limit order is similar to stop-loss order, but there is a limit on the price at which they will execute. There are then two prices specified in a stop-limit order: the stop price, which will convert the order to a sell order, and the limit price. Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute at the limit price or better.
Technical Indicators
Technical Indicators, also known as "Technicals", are heuristic or mathematical calculations that are focused on historical trading data (price, volume, open interest, etc.), rather than the fundamentals of a business (earnings, revenue, or profit margins, etc.). Technical indicators are commonly used by active traders, since they're designed to analyze short-term price movements, but long-term investors may also use technical indicators to predict future price movements and identify entry and exit points.
ticker symbol
A Ticker Symbol is an arrangement of characters—usually letters—representing particular securities listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities that investors and traders use to transact orders. Stock or equity symbols are the most known type of ticker symbol. Stocks listed and traded on U.S. exchanges such as the New York Stock Exchange have ticker symbols with up to three letters. Nasdaq-listed stocks have four-letter ticker symbols.
Value Price
Value Price is 50% of our proprietary Market Price calculation. We aim to invest in companies where their Current Price is at or below our Value Price. This ensures we are buying a company’s stock at at least a 50% discount.
Volume
Volume is the number of shares or contracts traded in a security or an entire market during a given period of time. For every buyer, there is a seller, and each transaction contributes to the count of total volume. That is, when buyers and sellers agree to make a transaction at a certain price, it is considered one transaction. We look for companies that trade a minimum of 500,000 shares per day, as this indicates a larger cap company and a relatively stable stock price as it relates to normal buying and selling.
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