Definitions

The Motley Fool's Industry Snapshot Spreadsheet Guide

*It is important to note that not all of these ratios will be utilized in every issue of Industry Snapshot. Beginning with the "Comparative Valuations" Spreadsheet and starting on the right side the following are inputs (figures that are provided by Fools working feverishly to unearth the requisite data):

1Q: This is the earnings per share (EPS) figure for the company's most recent reported quarter. It is followed by 2Q, 3Q and 4Q, which together constitute the trailing EPS for the company.

1 Year: This is taken from analysts' estimates for the company's current fiscal year. Industry Snapshot uses Zack's estimates. Note that not all companies operate on the calendar year and that each will differ in its nearness to the end of its current year.

2 Year: These are estimates for the company's coming fiscal year, occurring after the end of its current fiscal year.

CAGR: This comes from analysts' estimates for the company's compound average growth rate for the next five years, expressed as a percentage. Industry Snapshot gets its CAGR from Zacks.

Q->: This number represents the number of quarters that the company is currently away from its farthest estimate. If the company is into its second quarter of fiscal year 1997 but has yet to report, and its furthest EPS estimate is for 1998, then it is seven quarters away from its farthest estimate.

Yield: The yield is computed by taking the dividend paid in the last four quarters and then dividing the figure by the current share price. The result is the percentage of the share price that investors receive as a dividend.

Trailing: This is the sum of the company's earnings per share for last four quarters, 1Q+2Q+3Q+4Q.

P/E: The Price/Trailing Earnings Ratio essentially gives a ratio of how much you are paying for a dollar of earnings, allowing you to compare a stock to its peers on an apples-to-apples basis. It is the price of the stock divided by its company's earnings over the past 12 months.

Grw: This is the total amount of growth that is projected to occur based on trailing estimates and 2-year estimates. If trailing earnings stand at $1.27 and the 2-year estimate is for $1.97, that represents a growth of 55%, over however many quarters there are that separate the two.

Ann: This represents the annualized growth rate for the company. The Grw calculates the growth rate over however many quarters separate the trailing EPS from the 2-year estimate. The Ann. number converts the figure into a rate for one year.

PEG: Price/Earnings Ratio over earnings per share (EPS) Growth Rate. This is a Foolish valuation that is also known as the Fool Ratio. It is detailed in our PEG area in How To Value Stocks. Essentially, this is a shorthand method to determine how underpriced or overpriced a stock is, given the assumption that the P/E ratio should equal the rate of EPS growth.

5PEG: In the Industry Snapshot, the 5PEG is calculated by taking the current price of the stock and dividing by a denominator that consists of the farthest estimate (2-year) times the 5-year estimated growth rate (CAGR). The Industry Decathlon uses this calculation to figure the YPEG.

YPEG: The Year-ahead PEG is also detailed in our PEG area in How to Value Stocks. Essentially, this is a shorthand method for determining how underpriced or overpriced a stock is given the assumption that the Price/Earnings ratio should equal the estimated long-term growth rate.

DPEG: This calculation factors in the dividend as a means of evaluating a company's prospects. This Peter Lynch favorite is simply the sum of the 5-year growth rate and the dividend yield divided into the P/E ratio.

CPEG: The CPEG is simply the average of all the PEGs (PEG+ 5PEG+ YPEG+ DPEG/4).

Graham: The Benjamin Graham Valuation Method presents the investor with a target price for a stock where the Fair Price = 2 Year x (8.5 + (2 x CAGR) x (4.4 / AAA Corporate Bond rates). More information about this calculation can be found in the Industry Decathlon primer.

Market Cap = Market Capitalization: This is the number of shares outstanding times the current share price. Essentially, this is what the company is currently on sale for -- or at least what someone who acquired the company would have to pay.

Enterprise Value: Enterprise value is the market capitalization plus debt minus cash and investments. The idea is that when you buy a company you have to assume the debt in addition to getting the cash as part of the deal. Enterprise value is an attempt to more accurately reflect the value of the company at any one time rather than using market capitalization.

PSR or P/S: The Price/Sales Ratio is derived by dividing the current market capitalization of the company by the last four quarters trailing revenues. This gives a guide to how a company is valued relative to its peers when it does not have current earnings to compare.

EV/SR: The Enterprise Value/Sales Ratio is a better indicator than the PSR of the true value of a company. Where the PSR uses the company's market cap for the numerator, EV/SR looks at the enterprise value. Both ratios use the denominator of trailing revenues. To get the company's enterprise value, take the market cap (share price times shares outstanding), add the long-term debt, and then subtract the cash and cash equivalents.

Price to Book: Book value is literally the value of a company that can be found in the accounting ledger. In order to get book value, take the company's shareholder equity and divide it by the current number of shares outstanding. Then take the company's share price and divide it by the book value to get the price to book.

Cash/Share: A measure of how much cash per share a company currently has.

WC/Market Value: Working capital is the difference between current assets and current liabilities. This is a measure of what percentage of the market cap is currently found in the working capital, signaling value. This is divided by market value, which is market capitalization plus long-term debt.

(WC-I)/Market Value: This is working capital minus the inventory divided by the market value (which is the market cap. plus the company's long-term debt). This ratio measures the working capital that's not tied up in inventory relative to its current market value. This is a measure of the working capital that can be used toward growing the business. The inventory is subtracted from the working capital because, in some instances, the liquidation value of the inventory is lower than what the FIFO (first in, first out) or LIFO (last in, first out) value would indicate.

Current: The current ratio is a measure of liquidity. You just take the current assets and divide by the current liabilities. Ideally, this is 1.0 or greater in financially strong companies.

Quick Ratio: This ratio is current assets minus inventories over current liabilities. By taking inventories out of the equation, investors can check and see if the company has sufficient liquid assets to meet short-term operating needs.

Insider Holdings: This figure states how much stock, as a percentage of the outstanding shares, insiders own. A high figure is a confidence vote, if executives and directors have their personal fortunes tied to the success of the company.

RS: relative strength is a measure of how well the stock has performed relative to the market over the past two years. It is scored on a scale of 1 to 99, with 99 being the best. This is a proprietary figure that essentially tells investors which companies have significant earnings momentum. Industry Snapshot gets this figure from Investors Business Daily.

ROE: return on equity is a measure of how well a company uses all of its equity (assets minus liabilities) to generate net income. The basic calculation is net income divided by shareholders equity to yield a figure expressed as a percentage.

Templar ROE: An Industry Decathlon ratio in which fair price is determined by the following: Fair Multiple = (ROE + CAGR) / 2. The fair price is calculated by taking the trailing EPS and multiplying it times the fair multiple.

Uptrend ROE: This Industry Decathlon ratio incorporates not only EPS growth, but earnings and dividend yield as well. Like Templar ROE, Uptrend ROE yields a fair price for the issue. More information on this figure can be found in the Industry Decathlon Primer.

Inventory Turnover: This measures the number of times that a company's full inventory is turned over in the course of a year. This is calculated by taking the Cost of Goods Sold figure (COGS) and dividing it by the average inventory for the company.

Receivables Turnover: Accounts receivable turnover is a measure of how many times each year a company completely turns its receivables, meaning that customers are paying up. The higher the figure the better.

DSO: Days Sales Outstanding measures the company's control on receivables. A company whose DSO is 50 takes 50 days to collect accounts receivable. Smaller numbers mean the company can use that money -- which is a good thing.

Enterprise/Operating: This is calculated by dividing the company's enterprise value by its trailing operating earnings.

LT Debt/Equity: This figure is the company's long-term debt divided by its shareholder equity. This figure tells investors what percentage of every dollar in shareholders equity is long-term debt.

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