Metrics Glossary

Plain-English definitions for every field you see on Equity Rank — what each number measures and how to read it. Educational reference only; nothing here is investment advice.

Strength & Scores

Fundamental Strength: Fundamental Strength grades how strong the underlying business is, independent of whether the stock looks cheap or expensive. It blends five fundamental pillars — Profitability, Financial Health, Earnings Quality, Capital Allocation, and Growth Durability — into a single 0–100 score and an A+ to F letter grade. Pillars with no available data are dropped and the rest re-weighted, so the grade always reflects real data rather than filled-in blanks.; How to read it: A higher grade means the business scores well across profitability, balance-sheet health, accounting quality, capital discipline, and durable growth. It is a measure of business quality, not a measure of whether the stock is cheap.
ER Score: The Equity Rank Score is our headline 0–100 composite. Unlike Fundamental Strength, it deliberately blends business quality WITH valuation cheapness, momentum, innovation exposure, and macro positioning, using weights tuned per sector. Quality gates prevent low-confidence or low-quality names from scoring highly.; How to read it: A higher score reflects a more favorable overall standing across all model pillars combined. It is informational and is not a recommendation to take any action.
Model Confidence: Model Confidence reflects how much trust to place in the valuation outputs. It rises when multiple valuation methods agree, the underlying data is complete and high-quality, and the best-fit method is well-suited to the company. It falls for thin data or wide disagreement between methods.; How to read it: Higher means the fair-value estimate rests on fuller, more consistent inputs. Lower means treat the estimate with extra caution.

Valuation

Model Fair Value: The model fair value blends the outputs of many independent valuation methods (P/E, P/B, P/S, EV/EBITDA, discounted cash flow, Graham number, and others) into a single trailing-twelve-month estimate. It is a current-snapshot model estimate of intrinsic value — not a forward projection of future trading levels.; How to read it: Comparing price to the model fair value gives the Margin of Safety. It is informational and not a recommendation.
MoS%: Margin of Safety expresses the gap between the model fair value and the current price as a percentage. A positive value means the price is below the model fair-value estimate; a negative value means it is above. It is a current-snapshot measure on a trailing-twelve-month basis, not a forward projection.; How to read it: Positive = price below the model estimate; negative = price above it. Informational only.
Combined MoS%: A variant of Margin of Safety calculated against the combined SAVE + Innovation fair-value estimate, which overlays sentiment and innovation signals onto the core valuation. Current-snapshot, trailing-twelve-month basis.
P/E: The trailing P/E ratio divides the share price by earnings per share over the last twelve months. It shows how much investors are paying for each dollar of recent earnings. "N/M" (not meaningful) appears when earnings are negligible or negative.; How to read it: A lower P/E means a lower price per dollar of trailing earnings; appropriate ranges vary widely by sector and growth rate.
Fwd P/E: The forward P/E divides the share price by the consensus estimate of next year’s earnings per share. It reflects expectations rather than reported results and depends on the accuracy of analyst estimates.
P/B: The price-to-book ratio compares the share price to the company’s book value (assets minus liabilities) per share. It is most informative for asset-heavy businesses such as banks and is less meaningful for asset-light or intangible-heavy firms.
EV/EBITDA: EV/EBITDA divides enterprise value (market cap plus net debt) by earnings before interest, taxes, depreciation, and amortization. Because it includes debt and ignores financing/tax differences, it allows comparison across companies with different capital structures.
PEG: The PEG ratio divides the P/E by the expected earnings growth rate, putting valuation in the context of growth. It helps compare companies growing at different speeds.
P/S: The price-to-sales ratio divides market value by revenue. It is useful for companies with little or no profit, where earnings-based multiples are not meaningful.

Profitability

Profitability: The Profitability pillar combines return on equity, return on invested capital, net/operating/gross margins, free-cash-flow yield, and gross profitability. Together they describe how much profit and cash the business generates relative to its sales and the capital it employs.
ROE: Return on equity measures net income relative to shareholders’ equity — how much profit the company generates from the money shareholders have invested. Very high ROE can sometimes reflect heavy leverage rather than operating strength.; How to read it: Higher generally indicates more profit generated per dollar of equity.
ROA: Return on assets measures how efficiently a company turns its total asset base into profit, regardless of how those assets are financed.
ROIC: ROIC measures the after-tax return the business earns on all the capital (debt and equity) invested in operations. Compared against the cost of capital, it shows whether the company creates or destroys value.; How to read it: Higher means the business earns more on each dollar of capital it employs.
Net Margin: Net margin is the share of each dollar of revenue that remains as net profit after all expenses, interest, and taxes.
Operating Margin: Operating margin measures profit from core operations as a share of revenue, before interest and taxes. It isolates operating efficiency from financing and tax effects.
Gross Margin: Gross margin is the share of revenue left after the direct cost of producing goods or services. Higher gross margins often indicate pricing power or a differentiated product, though typical levels vary greatly by industry.
FCF Yield: Free-cash-flow yield expresses the cash a business generates (after capital spending) as a percentage of its market value. It shows how much actual cash the business produces relative to its price.

Financial Health

Financial Health: The Financial Health pillar combines the Piotroski F-Score, leverage (debt-to-equity), and an estimated distress probability. It describes how resilient the balance sheet is and how comfortably the company can service its obligations.
Piotroski F-Score: The Piotroski F-Score (Piotroski, 2000) awards one point each for nine fundamental tests across profitability, balance-sheet leverage/liquidity, and operating efficiency, for a total of 0–9. It is a widely used quick read of fundamental health.; How to read it: Higher (closer to 9) indicates more of the financial-health checks are passing.
Debt/Equity: The debt-to-equity ratio compares total debt to shareholders’ equity. It shows how much the company relies on borrowing relative to equity financing. Acceptable levels vary widely by industry.; How to read it: Lower generally indicates a more conservatively financed balance sheet.
Distress Probability: Distress probability converts the Ohlson O-Score (Ohlson, 1980) — a bankruptcy-prediction model — into an estimated likelihood of financial distress over roughly two years. It is not calculated for banks, insurers, and REITs, where the model does not apply.; How to read it: Lower indicates less estimated distress risk based on the model’s inputs.

Earnings Quality

Earnings Quality: The Earnings Quality pillar combines the Beneish M-Score, accruals, cash-conversion ratio, receivables quality, and earnings-surprise consistency. It flags whether reported profits are well-supported by cash flow and conservative accounting, versus relying on aggressive estimates.
Cash Conversion: The cash-conversion ratio divides operating cash flow by net income. A ratio near or above 1.0 indicates earnings are well-backed by cash; persistently low ratios can signal earnings that rely on non-cash accruals.
Beneish M-Score: The Beneish M-Score (Beneish, 1999) combines eight financial ratios into a single number that estimates the likelihood of earnings manipulation. Readings above roughly −1.78 are commonly treated as a flag for further scrutiny. It is a screening signal, not a determination of wrongdoing.; How to read it: More negative readings indicate accounting that looks less likely to be manipulated.

Capital Allocation

Capital Allocation: The Capital Allocation pillar combines economic spread (returns above the cost of capital), total shareholder yield, share issuance/dilution, and an overall capital-allocation composite. It describes how productively management invests and whether capital is returned without excessive dilution.
Economic Spread: Economic spread is ROIC minus the cost of equity capital. A positive spread means the business earns more than its capital costs (value creation); a negative spread means the opposite.
Shareholder Yield: Total shareholder yield captures all the ways cash is returned to (or raised from) shareholders: dividends plus net share buybacks minus net debt issuance, relative to market value. A negative figure indicates a net issuer of stock or debt.
Capital Allocation Score: The capital-allocation score combines economic spread, the sustainable growth rate, and the trend in goodwill (a proxy for acquisition discipline) into a 0–100 read of management’s capital stewardship.

Growth

Growth Durability: The Growth Durability pillar combines revenue growth, 3-year free-cash-flow CAGR, the multi-year trend in return on equity, and the multi-year change in gross margin. It describes whether the business is sustaining and broadening its growth rather than relying on one-off jumps.
Rev Growth: Revenue growth measures the year-over-year change in sales, showing how quickly the top line is expanding or contracting.
FCF 3yr CAGR: The 3-year free-cash-flow CAGR measures the compound annual growth rate of free cash flow over three years. It is left blank when an endpoint is non-positive, since a growth rate is undefined for a sign-flipping series.
ROE 3yr Δ/yr: This is the linear slope of return on equity over three years, expressed in percentage points per year. A positive value indicates ROE has been expanding; negative indicates contraction. Informational trend signal only.
GM Δ 3yr: This is the end-to-end change in gross margin over three years, in percentage points. Positive values indicate margin expansion; negative values indicate compression. Informational trend signal only.

Risk & Market

SAVE Δ30d: The change in the SAVE composite (a sentiment-adjusted signal blending news, social, analyst, and search data) over the last 30 days. Larger positive values indicate improving sentiment momentum. Informational only.
Risk: The risk score summarizes a stock’s market sensitivity (beta) and price volatility into a 0–100 scale, where higher means more volatile/sensitive. It is labeled Low, Mid, or High.
Beta: Beta measures how much a stock tends to move relative to the broad market. A beta above 1.0 indicates larger swings than the market; below 1.0 indicates smaller swings.
Mkt Cap: Market capitalization is the total market value of a company’s equity, calculated as share price multiplied by shares outstanding.
Dividend Yield: Dividend yield expresses the annual dividend as a percentage of the current share price — the income return from dividends alone.
AI Impact: The AI impact score estimates how artificial-intelligence trends may affect the company’s revenue model, on a 0–100 scale where lower indicates a likely beneficiary and higher indicates a likely headwind. It is a directional research signal, informational only.

Equity Rank provides research information and is not a registered investment adviser. The metrics described here are informational and do not constitute investment advice or a recommendation regarding any security.