So it's a good idea to compare a stock's debt to equity ratio to its industry to see how it stacks up to its peers first. Cash flow can be found on the cash flow statement. It's then divided by the number of shares outstanding to determine how much cash is generated per share.
It's used by investors as a measure of financial health. Cash is vital to a company in order to finance operations, invest in the business, pay expenses, etc. Since cash can't be manipulated like earnings can, it's a preferred metric for analysts. Using this item along with the 'Current Cash Flow Growth Rate' in the Growth category above , and the 'Price to Cash Flow ratio' several items above in this same Value category , will give you a well-rounded indication of the amount of cash they are generating, the rate of their cash flow growth, and the stock price relative to its cash flow.
This longer-term historical perspective lets the user see how a company has grown over time. Note: there are many factors that can influence the longer-term number, not the least of which is the overall state of the economy recession will reduce this number for example, while a recovery will inflate it , which can skew comparisons when looking out over shorter time frames.
The longer-term perspective helps smooth out short-term events. Projected EPS Growth looks at the estimated growth rate for one year. It takes the consensus estimate for the current fiscal year F1 divided by the EPS for the last completed fiscal year F0 actual if reported, the consensus if not. That does not mean that all companies with large growth rates will have a favorable Growth Score. Many other growth items are considered as well.
But, typically, an aggressive growth trader will be interested in the higher growth rates. Cash Flow is net income plus depreciation and other non-cash charges. A strong cash flow is important for covering interest payments, particularly for highly leveraged companies. Cash Flow is a measurement of a company's health.
It's typically categorized as a valuation metric and is most often quoted as Cash Flow per Share and as a Price to Cash flow ratio.
In this case, it's the cash flow growth that's being looked at. A positive change in the cash flow is desired and shows that more 'cash' is coming in than 'cash' going out.
The Historical Cash Flow Growth is the longer-term year annualized growth rate of the cash flow change. Once again, cash flow is net income plus depreciation and other non-cash charges.
Cash flow itself is an important item on the income statement. While the one year change shows the current conditions, the longer look-back period shows how this metric has changed over time and helps put the current reading into proper perspective. Also, by looking at the rate of this item, rather than the actual dollar value, it makes for easier comparisons across the industry and peers. The Current Ratio is defined as current assets divided by current liabilities.
It measures a company's ability to pay short-term obligations. It's also commonly referred to as a 'liquidity ratio'. A ratio of 1 means a company's assets are equal to its liabilities. Less than 1 means its liabilities exceed its short-term assets cash, inventory, receivables, etc.
Above 1 means it assets are greater than its liabilities. A ratio of 2 means its assets are twice that of its liabilities. A higher number is better than a lower number. A 'good' number would usually fall within the range of 1. Like most ratios, this number will vary from industry to industry. This measure is expressed as a percentage.
A higher number means the more debt a company has compared to its capital structure. Investors like this metric as it shows how a company finances its operations, i. But note; this ratio can vary widely from industry to industry. So be sure to compare it to its group when comparing stocks in different industries. Net Margin is defined as net income divided by sales. This shows the percentage of profit a company earns on its sales. A change in margin can reflect either a change in business conditions, or a company's cost controls, or both.
If a company's expenses are growing faster than their sales, this will reduce their margins. But note, different industries have different margin rates that are considered good. And margin rates can vary significantly across these different groups.
So, when comparing one stock to another in a different industry, it's best make relative comparisons to that stock's respective industry values. Return on Equity or ROE is calculated as income divided by average shareholder equity past 12 months, including reinvested earnings.
Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. Interactive Chart. All Market Moves. Calabria had been a proponent of quickly exiting Fannie and Freddie from conservatorship. Given the reaction of the market, it seems like the ruling came as a bit of a shock. The case is not completely finished and has been sent back to the lower courts, where investors can still argue their second claim regarding the difficulty of removing the FHFA director by the president.
But Elliot Stein, an analyst for Bloomberg Intelligence, said the Supreme Court decision effectively means that shareholders "can't recover the bulk of the overpayments they sought. The removal of Calabria is also likely not good for Fannie and Freddie shareholders, either, because it could make a full exit from conservatorship less likely, or at least a lot slower. At the beginning of the year, the FHFA struck a deal with the Treasury allowing the two entities to retain all their profits in order to meet new capital rules set by the FHFA.
But this could take awhile. Meanwhile, Fannie Mae and Freddie Mac are still currently unable to raise private capital or issue shareholders a dividend while the Treasury has preferred shares, and while the two are under conservatorship -- two factors that are not appealing for investors. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception.
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