Glossary

• Accrual
  Quality of earnings (accrual) Compare Cash flow return on assets to return on assets. Compare if CFROA>ROA. The ratio is designed to highlight those companies where there may be "creative" accounting. Richard Sloan wrote a paper on this subject : "Do Stock Prices Fully Reflect Information in Cash Flows and Accruals About Future Earnings?" (1996) This paper shows that the accrual component of earnings is less persistent than the cash flow component of earnings, but that this difference is not reflected in stock prices. An investment strategy that goes long in low accrual firms and short in high accruals firms yields annual hedge portfolio returns in excess of 10%. High (low) accruals are indicative of aggressive (conservative) accounting, and so this paper documents significant returns to a very basic earnings quality strategy.
  

• Dividend Yield
  Dividend Yield = Rolling 12 month dividend / last price per share
  

• Earning Yield
  Earnings Yield= EBIT (Operating Income) / Enterprise Value
  The earnings yield can be used to compare the earnings of a stock, sector or the whole market against bond yields. Generally, the earnings yields of equities are higher than the yield of risk-free treasury bonds reflecting the additional risk involved in equity investments.
  

• EBIT
  Earnings Before Interest and Taxes is calculated as the trailing twelve months operating profit if available (if not then EBIT equals last year operating income)
  

• Enterprise Value
  Enterprise Value is calculated as Market Cap + Long-Term Debt + Minority Interest + Preferred Stock - Excess Cash. If the returned value for Enterprise value is negative, then a default value of 1 € is used.
  

• ERP5
  4 parameter( based on Price to Book, Earning Yield,ROIC and 5 year average ROIC) Value Investing Screener developped by MFIE
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• Excess Cash
  Excess Cash is determined. If Total Current Assets are greater than 2 * Total Current Liabilities, then Excess Cash is determined to be the lesser of Cash And Short Term Investments or Total Current Assets - 2 * Total Current Liabilities, otherwise it is zero,
  

• Free Cash Flow
  Free Cash Flow = Cash Flows from Operations - Capital Expenditure
  In corporate finance, free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on.
  

• Magic Formula (Joel Greenblatt)
  The "Magic Investment Formula" represents a simple screening process for determining an investment strategy in stocks, namely "cheap and good companies" with a high earnings yield and a high return on invested capital (ROIC). With this formula and on average you will be investing in good companies at a very reasonable price.You are buying good companies, on average, at cheap prices, on average.
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• NCAV
  NCAV = Current assets (cash, inventories and accounts receivable) – Total Liabilities More Info
  

• Net Fixed Assets
  Net Fixed Assets is calculated as Total Assets - Total Current Assets - Total Intangible assets,
  

• Net Working Capital
  Net Working Capital is calculated as Total Current Assets - Excess Cash - Total Current Liabilities if Total Current Assets exceeds Total Current Liabilities, otherwise it is zero
  

• Piotroski F-Score
  Joseph Piotroski, a University of Chicago accounting professor, came up with a nine point scoring mechanism for stocks. It was designed to be applied to value investment in low P/B stocks, but it is useful for any set of stocks. The analysis is based on accounting fundamentals.
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• ROIC
  Return on Invested Capital= EBIT (Operating Income) / (Net Working Capital + Net Fixed Assets)
  What Does Return On Invested Capital - ROIC Mean?
  A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital measure gives a sense of how well a company is using its money to generate returns. Comparing a company's return on capital (ROIC) with its cost of capital (WACC) reveals whether invested capital was used effectively.
  

• Shareholder Yield
  shareholder yield is the combination of the following:
  • Dividend Payouts
  • Stock Repurchase Programs
  "If a company trading at $40 will pay an annual dividend of $1, the DY is 2.5%. If same company had 1,000,000 shares outstanding at beginning of year and 900,000 at end of year, the company's buyback yield would be 10%. Summing the two, you get a shareholder yield of 12.5%."