GLOSSARY
Stock Market Terms
Essential investing terminology explained in plain language. From fair value to free cash flow, understand the concepts that drive stock valuation.
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Beta
A measure of a stock's price volatility relative to the overall market, where 1.0 equals market-average volatility.
Book Value
Total assets minus total liabilities, representing the net asset value of a company on its balance sheet.
Bull Market / Bear Market
A bull market is a sustained period of rising prices (20%+ gain); a bear market is a sustained decline (20%+ drop from peak).
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D
Debt-to-Equity Ratio
Total debt divided by shareholder equity, measuring how much a company relies on borrowed money versus its own capital.
Discounted Cash Flow (DCF)
A valuation method that projects future cash flows and discounts them to present value using an appropriate discount rate.
Dividend Payout Ratio
The percentage of net income paid out as dividends, indicating how much profit a company returns to shareholders versus reinvests.
Dividend Yield
Annual dividend payment divided by stock price, expressed as a percentage of return from dividends alone.
E
Earnings Per Share (EPS)
Net income divided by shares outstanding, representing the profit allocated to each share of common stock.
Earnings Yield
Earnings per share divided by stock price, the inverse of P/E, expressing earnings as a percentage return on the stock price.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization, measuring operating profitability independent of capital structure.
Enterprise Value (EV)
The total cost of acquiring a company, calculated as market capitalization plus debt minus cash.
EV/EBITDA
Enterprise Value divided by EBITDA, a debt-adjusted valuation ratio comparing what a company costs to acquire versus what it earns.
F
Fair Value
The estimated intrinsic worth of a stock based on fundamental analysis rather than its current market price.
FPI Rating
A proprietary 0–10 score measuring overall company quality based on six fundamental factors, Piotroski F-Score, and Altman Z-Score.
Free Cash Flow (FCF)
Cash generated by operations minus capital expenditures, representing cash available to shareholders and debt holders.
Free Cash Flow Yield
Free cash flow per share divided by stock price, showing how much real cash a business generates relative to what you pay for it.
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PEG Ratio
P/E ratio divided by expected earnings growth rate, adjusting valuation for growth to identify stocks priced fairly relative to their expansion.
Piotroski F-Score
A 0–9 scoring system that evaluates a company's financial strength through nine binary accounting tests.
Price-to-Book Ratio (P/B)
Stock price divided by book value per share, comparing market valuation to net asset value on the balance sheet.
Price-to-Earnings Ratio (P/E)
Stock price divided by earnings per share, indicating how much investors pay for each dollar of earnings.
Price-to-Sales Ratio (P/S)
Market capitalization divided by annual revenue, used to value companies that are not yet profitable or have volatile earnings.
R
Relative Valuation
Comparing a stock's valuation multiples against sector peers to determine if it is cheap or expensive relative to similar companies.
Return on Equity (ROE)
Net income divided by shareholder equity, measuring how efficiently a company generates profit from shareholder investments.
Return on Invested Capital (ROIC)
The percentage return a company generates on all capital invested in its operations, measuring true value creation.
Revenue
The total income a company generates from selling goods or services before any expenses are deducted, also called the top line.