Explanation: Book Value represents the net asset value of a company per share. It's calculated as (Total Assets - Total Liabilities) / Shares Outstanding. A higher book value suggests the company has more assets relative to liabilities.
Return on Capital Employed (ROCE)
Explanation: ROCE measures how efficiently a company generates profits from its capital. Formula: EBIT / Capital Employed. A higher ROCE (typically above 15-20%) indicates better efficiency in using capital.
Return on Investment (ROI)
Explanation: ROI measures the return generated on an investment relative to its cost. Formula: (Net Profit / Investment Cost) × 100. Positive ROI indicates profitable investment.
Return on Invested Capital (ROIC)
Explanation: ROIC measures how well a company generates cash flow relative to the capital it has invested. Formula: NOPAT / Invested Capital. Good companies typically have ROIC above 10-12%.
Current Ratio
Explanation: Current Ratio measures a company's ability to pay short-term obligations. Formula: Current Assets / Current Liabilities. A ratio between 1.5 and 3 is generally healthy. Below 1 may indicate liquidity issues.
Free Cash Flow
Explanation: Free Cash Flow represents the cash a company generates after accounting for cash outflows to support operations. Formula: Operating Cash Flow - Capital Expenditures. Positive FCF is generally good as it allows for dividends, debt repayment, and growth.
Debt to Equity Ratio
Explanation: This ratio indicates the relative proportion of shareholders' equity and debt used to finance assets. Formula: Total Liabilities / Shareholders' Equity. A ratio below 1 is generally safe, while above 2 may be risky (varies by industry).
Free Cash Flow Per Share
Explanation: FCF per share shows how much cash flow is available to equity holders per share. Formula: Free Cash Flow / Shares Outstanding. Higher values are better, indicating more cash available per share.
Interest Coverage Ratio
Explanation: This ratio measures how easily a company can pay interest on outstanding debt. Formula: EBIT / Interest Expense. A ratio below 1.5 may indicate financial stress, while above 3 is generally safe.
5-Year Revenue Growth Rate
Explanation: This shows the compound annual growth rate of revenue over 5 years. Formula: [(Current Revenue / Revenue 5 Years Ago)^(1/5) - 1] × 100. Consistent growth is generally positive, but compare to industry averages.
5-Year Earnings Growth Rate
Explanation: This shows the compound annual growth rate of earnings over 5 years. Formula: [(Current Earnings / Earnings 5 Years Ago)^(1/5) - 1] × 100. Consistent earnings growth is a key indicator of company health.
5-Year Free Cash Flow Growth
Explanation: This shows the compound annual growth rate of free cash flow over 5 years. Formula: [(Current FCF / FCF 5 Years Ago)^(1/5) - 1] × 100. Growing FCF is positive as it provides flexibility for dividends, buybacks, and investments.
5-Year Dividend Growth Rate
Explanation: This shows the compound annual growth rate of dividends over 5 years. Formula: [(Current Dividend / Dividend 5 Years Ago)^(1/5) - 1] × 100. Consistent dividend growth is attractive to income investors.
Dividend Payout Ratio
Explanation: This ratio shows what percentage of earnings is paid to shareholders as dividends. Formula: Dividends Paid / Net Income. A ratio below 60% is generally sustainable, while above 80% may be risky.
Share Buyback Rate
Explanation: This shows the annual rate at which shares are being repurchased. Formula: [1 - (Current Shares / Shares 5 Years Ago)^(1/5)] × 100. Buybacks can increase EPS by reducing share count, but evaluate if done at reasonable prices.
Piotroski F-Score
Answer these 9 questions (1 point each):
Explanation: The Piotroski F-Score is a discrete score between 0-9 that reflects nine fundamental factors. Scores of 8-9 are strong, 6-7 are good, and ≤5 are weak. It helps identify financially strong value stocks.
Margin of Safety
Explanation: Margin of Safety represents the difference between intrinsic value and market price as a percentage. Formula: [(Intrinsic Value - Market Price) / Intrinsic Value] × 100. A higher percentage indicates a larger safety buffer (typically 20-30% is desirable).
