Predicted Growth Rate (PR GR or PGR):
This is the consensus of analysts projected average annual compounded earnings growth rate for the next five (5) years. Most growth companies have PGR's of at least 12%-15%. Most of our listed income companies have PGR's of at least 3%-4%, some considerably more, to provide a degree of protection against capital degradation due to a presumed nominal level of inflation.
Number of Years (#YRS):
This is the length of time it would take, assuming price does not change and earnings grow at the projected rate, for PE to reach the nominal PE value shown. This is a critical period during which investors who buy stocks with unusually high PE's must hope that earnings targets are met. Any earnings disappointment or negative rumor related to these stocks during this interval is likely to be greeted by a rapid and significant price drop, as illustrated by many recent examples.
Accumulation/Distribution Rating (AD):
This rating indicates whether short term momentum, a function of buying and selling pressures, is up [values of 1 (best) or 2], down [values of 4 or 5(worst)], or neutral (3). This is closely related to price trend, although in some cases the AD rating may differ from the conclusion one might reach from just looking at a price chart. We advise avoiding new purchases of stocks which rate poorly according to this criterion and/or appear to be in a distinct downward price trend.
Chart Price Trend (CPT):
This criterion indicates whether the latest price chart pattern is up, down, or neutral. Range of values is 1 to 5, small best, with 1 denoting a strong and consistent uptrend, 2 a slightly less well defined uptrend, 3 neutral, and 4 and 5 denoting progressively stronger downtrends. Investors considering a new stock purchase should always view the latest price chart, available from the data access pages, to determine if recent price trend is favorable or at least no worse than neutral.
Growth Rating (GR):
Evaluation of earnings growth consistency and persistence, with small best. Values for our listed stocks range from 1, denoting consistently rising earnings (usually at least 8-10 consecutive up years) to rather erratic, denoted by 3 (several years when earnings are flat or down somewhat within a mildly upward overall trend). A value of 2 denotes a somewhat erratic, but generally upward, pattern. GR can be interpreted as a measure of earnings predictability, growth quality, or performance probability for each stock being considered as a potential growth or income portfolio candidate.
Consensus of Investment Analysts (CIA):
The degree of analyst support. The range is 1-9, with 1.0 denoting very strong support, 9.0 denoting a strong sell bias, 5.0 neutral, and values ranging from 1.0 to 9.0 indicating progressively weaker levels of support. Stocks with CIA ratings greater than 5.0 should usually be avoided as new purchases, although in some cases this may present an opportunity to accumulate them at reasonable prices if they are otherwise desirable as long term investments. It is seldom timely to buy stocks when analysts are recommending that they be sold.
General Rating (GEN):
This is a combined rating based on recent price and earnings trends, growth consistency, financial strength, etc., derived from a similar rating presented daily in Investor's Business Daily (IBD, PO Box 661750, Los Angeles, CA 90066-8950, $197/yr.). IBD awards each stock a percentile ranking from 1 to 99 according to how it compares to all other stocks in their database. We present only the decile in which their latest ranking occurs--i.e. a 97% rating is presented as 9 in our database, 63% as 6, etc. Thus our range is 0 to 9, with 9 best. Investors are referred to IBD, an excellent source of a wide range of news, data and investment analysis, for a more precise value.
Relative Earnings Strength (RES):
This criterion indicates the relative percentile rank of earnings per share performance over the last year. The range is 0-9, with large values best. Earnings performance of each stock is compared to that of all others and the result indicates the percentage decile of those stocks that were outdone by the particular stock of interest. In other words if earnings advance (decline) of the stock was superior to that of 73% of stocks in the universe, that stock rates a 7, etc. Investors interested in a more precise figure should refer to Investor's Business Daily where precise figures are presented every day. Some industries, utilities for example, consistently rank poorly using this function, which should be taken into account when using this criterion in making investment decisions.
Relative Price Strength (RPS):
This criterion indicates the relative percentile rank of price performance over the last year. The range is 0-9, with large values best. Price performance of each stock is compared to that of all others and the result indicates the percentage decile of those stocks that were outdone by the particular stock of interest. In other words a stock that did better than 73% of stocks in the universe receives a 7, etc. Investors interested in a more precise figure should refer to Investor's Business Daily where precise figures are presented every day. Some industries, utilities for example, consistently rank poorly using this function, which should be taken into account when using this criterion in making investment decisions.
Growth Investment Value (GIV):
This is our proprietary estimate of the total return percent advantage from stock ownership over the next five (5) years relative to a five (5) year treasury security (used as a reference due to its presumed safety). The effects of taxes are disregarded, since they vary widely depending on individual circumstances. Values of GIV range from minus values, meaning that T-Bills offer a superior return, to values up to 200% or more. The total capital return, including dividends and assuming the stock is sold for a price equal to the projected annual earnings 5 years hence times the nominal PE, is divided by that derived from treasury security ownership over the same time interval, and the advantage (disadvantage) expressed as a percentage. Note: Future estimates will only come to fruition if earnings and dividend projections are achieved or exceeded and if it is possible to sell the stock after five years at a price at least consistent with the nominal PE presented. Such conditions are by no means guaranteed.
Master Indicator (MI):
MI is a composite indicator derived as a penalty function from the various criteria discussed above. Weakness in any of these important evaluation criteria adds to the value of MI, with significant weakness in each area generally contributing at least 4-5 points to the cumulative value. The MI range is roughly 0-50, with smaller values best. New purchases of stocks with MI values above 8-10 should generally be avoided. Values below 5 are most desirable, although under bullish market conditions such values may be hard to find.
Buy Flags (BF):
Stocks which rate particularly well according to most evaluation criteria, and not specifically bad as measured by any of those considered critically important, are flagged to indicate they merit serious consideration for investment purposes. Three flags, A-, A, and A+, denote stocks which rate progressively better according to the complete set of evaluation criteria used. All of these stocks merit a careful look according to expectations for future growth obtained from generally reliable sources of earnings and dividend growth estimates.
Stocks which we suggest should be avoided, waiting for a more appropriate buying opportunity, are denoted by an X in the flag column. This X may be due to analysts' sell recommendations, negative momentum or price trend, low profit potential, insider selling, or a combination of these factors. Some aggressive investors may interpret these as sell flags, but that is not our intention. Many of these stocks may merit a flag in the "A" category within a few months, since the "X" may simply indicate that the current price trend is temporarily unsatisfactory.
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