Valuation glossary — every term, in plain English

Valuation

Discounted cash flow (DCF)

A way to value a company by estimating the cash it will produce in future years and translating that back into today's money (because a dollar next year is worth less than a dollar today). Add it all up and you get an estimate of what the whole business — and each share — is worth.

Fair value

Our DCF estimate of what one share is worth today. We compare it to the market price to say whether a stock looks under- or over-valued.

Intrinsic value

What a business is actually worth based on the cash it can generate over time — as opposed to its current share price. If the price is below intrinsic value, the stock may be a bargain; above, it may be expensive. Our estimate comes from a discounted-cash-flow (DCF) model and can be wrong.

Margin of safety

The gap between price and intrinsic value, buying below your estimate of worth so you have room to be wrong. A bigger discount = a bigger cushion if the future turns out worse than expected.

Reverse DCF

Instead of asking 'what is it worth?', a reverse DCF asks 'what would the company have to do to justify today's price?' It solves for the revenue growth already baked into the share price — a great gut-check on how optimistic the market is.

Upside / downside

How far the market price would have to move to reach our fair value. +20% upside means our estimate is 20% above the current price; a negative number means the price is already above our estimate.

DCF inputs

Free cash flow (FCF)

The cash a business has left after paying its running costs and investing to maintain and grow itself. It's the cash actually available to owners — and what a DCF values.

Terminal growth rate

The modest rate we assume the company grows at forever after the forecast period — usually near long-run economic/inflation growth (~2-3%). It must stay below the discount rate or the math breaks.

Terminal value

The estimated value of all the company's cash flows beyond the explicit forecast years (e.g. year 10 onward), assuming it keeps growing slowly forever. It's often the biggest single piece of a DCF, which is why we show what percent of the value comes from it.

WACC (discount rate)

Weighted Average Cost of Capital — the annual rate used to shrink future cash flows back to today's value. It reflects how risky the business is and the return investors demand. A higher WACC lowers the valuation; a lower WACC raises it. Drag the slider to see the effect.

Multiples

EV/EBITDA

Enterprise value (the whole company, including debt) divided by earnings before interest, tax, depreciation and amortisation. A capital-structure-neutral way to compare how richly two companies are priced.

Forward P/E

Like the P/E ratio, but using analysts' expected earnings for next year instead of the past year. A forward P/E below the trailing P/E means the market expects earnings to grow.

P/B ratio (price-to-book)

Share price divided by book value (the company's assets minus its liabilities, per share). Useful for asset-heavy businesses like banks; less meaningful for asset-light ones like software.

P/E ratio (price-to-earnings)

Share price divided by earnings per share — roughly how many years of current profits you're paying for. Lower is cheaper, all else equal, but fast-growing companies fairly command higher P/Es.

P/S ratio (price-to-sales)

Share price divided by revenue per share. A quick gauge for companies that aren't yet very profitable, though it ignores how much of each sale becomes profit.

Financials

Current ratio

Assets due to turn into cash within a year divided by bills due within a year. Above 1 means short-term obligations are comfortably covered.

Debt-to-equity

Total borrowings divided by shareholders' equity — how much the company relies on debt versus owners' money. More debt magnifies both gains and losses and adds risk in a downturn.

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortisation — a rough proxy for operating cash generation before financing and accounting choices. Handy for comparisons, but it isn't the same as real cash flow.

Earnings per share (EPS)

A company's profit divided by its number of shares — the slice of profit attributable to each share you own.

Gross margin

Revenue minus the direct cost of the goods/services sold, as a percent of revenue. It shows the raw profitability of what the company sells, before overheads.

Market capitalisation

The total market value of a company's shares — share price times the number of shares. A quick measure of company size (small-, mid- or large-cap).

Net (profit) margin

The percent of revenue left as bottom-line profit after every cost — operating expenses, interest and tax. What ultimately belongs to shareholders.

Operating margin

Operating profit as a percent of revenue — how many cents of each sales dollar are left after the day-to-day costs of running the business. Higher and steadier margins usually signal a stronger business.

Return on equity (ROE)

Annual profit as a percent of shareholders' money invested in the business. It shows how efficiently the company turns owners' capital into profit; consistently high ROE is a hallmark of quality.

Dividend

Dividend yield

The annual dividend as a percent of the share price — the cash return you receive each year just for holding, before any price change.

Payout ratio

The share of earnings paid out as dividends. Below ~80% suggests the dividend is comfortably covered; above 100% means it's being funded from reserves or debt and may not last.

Risk

Beta

How much a stock tends to move relative to the overall market. Beta of 1 moves with the market; above 1 is more volatile, below 1 is steadier. It feeds into the WACC (riskier stocks get a higher discount rate).

Momentum

The tendency of a price trend to persist for a while. A stock above its 50- and 200-day averages with a positive yearly return has positive momentum. It describes recent behaviour, not a prediction — momentum reverses.

TickerWorth

Catalyst

Something happening now that's moving the stock — a big price move, unusual volume, an upcoming earnings date, a 52-week high/low, a trend change, or news. Catalysts are about the present, not long-run value; they can reverse quickly.

Confidence

How much data we actually had to work with. High means we could check everything we look for. Low means the figures were thin, so we show a range instead of a single number and won't award a top grade. When there's too little to be honest about, we publish no score at all rather than guess — the same reason a home-value estimate is less reliable in a quiet market.

Factor scores

A transparent 0-100 read on four classic investing 'factors' — value, quality, momentum and low-volatility — from simple rules over public data. A summary, NOT a rating or a recommendation.

Health checks

A set of plain pass/watch/fail tests across valuation, growth, financial health, dividend and past performance. Each shows the threshold, the company's actual number, and why it matters — so you can judge for yourself.

Market open outlook

A morning summary of the overnight backdrop — how Asian and European markets closed, where US index futures and the VIX are pointing — plus your watchlist's overnight moves and what's on today's calendar. It's context on what's already moving, NOT a prediction of the day.

Previous close

The last price a stock traded at in the previous regular session. It's the baseline every daily move is measured from, which is why a stock can show a gain even after opening lower than it closed.

TickerWorth Score

One 0-100 number (plus an A-F grade) summarising everything we check: how cheap it looks, how good the business is, how strong its balance sheet is, how fast it's growing, and what's moving it lately. The valuation part uses our blended fair-value range rather than a single model, so one bad estimate can't swing it. Explicitly NOT a rating, prediction, or advice, and it says nothing about future returns.

Today's move

How far the share price has travelled in the current session, measured against the previous session's closing price — shown in both money and percent. When today's market hasn't opened yet we show the last completed session instead, and say which day it was. A single day's move is mostly noise; it says nothing about what the business is worth.