Glossary
Beta: Measure of nondiversifiable risk relative to the S&P 500 reflecting the correlation of returns for a stock with the S&P 500.
Comps: Short for comparables; a term used to describe a set of peer companies used as a comparison, often for the purpose of establishing valuation multiples, beta, margins, growth, or other financial metrics.
Consensus earnings: Reported expected level of earnings by a group of analysts.
Constant growth equation: V = E/(C − G). Calculates the present value of a constant cash flow in perpetuity assuming constant cost of capital and growth rate.
Cost of capital (C): The required return to justify an investment or expected rate of return for an investment of similar risk.
Cost of debt: The effective rate a company pays on its debt.
Cost of equity: The return stockholders require for investing in a company; the risk-free rate plus a risk premium.
Discounted cash flow (DCF) analysis: Calculation of present of a stream of future cash flows used to evaluate the attractiveness of an investment.
Discount rate: Cost of capital used in DCF and PV analysis.
Earnings per share (EPS): Net income for a company divided by shares outstanding.
Enterprise value or total market value: The total value of a company, including equity, debt, minority interests, and preferred shares less cash and equivalents.
Equity risk premium (ERP): Return in excess of the risk-free (Rf) rate that the S&P 500 Index is expected to yield.
Forward P/E: P/E ratio based on consensus ...
