Glossary - amechine/finance GitHub Wiki
Stock
Beta
Beta is the measure of an asset’s risk in relation to the market
- 1: same risk as the market
- risk (> 1): move more (x - 1)% than the market
- stable (< 1): move less (1 - x)% than the market
CAGR
Compound Annual Growth Rate: the average rate of return on your investments over a year.
CAGR = ((EV / BV )^(1/n)) - 1.
where: EV: Ending value BV: Beginning value n: Number of years
- should be > S&P 500
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization: a measure of profitability to net income and is used to assess a company's profitability and financial performance
- Ratio < 3
EPS
Earnings per Share
- check positive YoY
ETF
Exchange-Traded Funds: a collection of stocks or bonds combined in a single fund that can be purchased and traded on major stock exchanges. Similar to mutual funds, they’re a pooled investment fund, meaning a “pool” of money is aggregated from multiple investors.
FCF
Free Cash Flow: A metric representing the cash a company has available after covering all its operating expenses, capital expenditures (CAPEX), and working capital needs
Graham's Intrinsic Valuation
GV = EPS * ( PE + LTGR ) * 4.4 / Y
LTGR: Long Term Growth Rate Y: Yield on 20 year AAA Corporate Bonds
MACD
Moving Average Convergence Divergence: a momentum indicator used to analyze price trends and identify potential buy and sell signals. It helps traders gauge the momentum of a stock and detect when it might be overbought or oversold.
PE (P/E)
Price/Earning Ratio: the ratio of a company’s share price to the company’s earnings per share
- < historically
P/S
Price / Sale:
- < 1: undervalued
ROIC
Return on Invested Capital: a profitability ratio that measures how efficiently a company uses its invested capital to generate profits
- default value: 5%; > 10% worth consideration
RSI
Relative Strength Index: a momentum indicator that measures the speed and magnitude of recent price changes to assess whether an asset is overbought or oversold.
- from 0 to 100; > 70: overbought; < 30: oversold
Options
Delta
A metric that measures how much an option's price is expected to change for every $1 change in the price of the underlying stock.
- call: between 0 and 1
- put: between 0 and -1
Gamma
A metric that measures the rate of change of an option's delta, which is the sensitivity of the option's price to changes in the underlying stock price
Theta
The rate at which an option's price is expected to decrease as time passes.
Vega
A metric that measures an option's sensitivity to changes in the implied volatility of the underlying stock