Essential Economic Indicators
Listed below are the essential economic indicators that have proven to be the most indicative of a stock's future performance and are available to you as a subscriber. Our combination of these these indicators lead to our A-B-C rankings of a stock's past and its future performance potential.
Value
Value evaluates a stock based on a combination of the long-term price appreciation potential of the stock compared to an investment in AAA rated Corporate Bonds, the statistical probability that a stock will meet its price performance expectations and the projections of a stock’s short-term price performance.
Growth Rate
Forecasted company earnings growth rate in percent per year. Higher growth rate stocks tend to appreciate in price; poor growth rate stocks tend to increase more slowly, cease to increase, or subsequently fall.
P/E
Price to Earnings ratio of a stock. It is computed from the following formula: P/E = Price / Earnings per share. In a nutshell, it is the number of dollars investors are willing to pay for each dollar of earnings a company makes. The historical average P/E of the S&P 500 is about 28. The low has been six and the high has been about 31. This means that historically investors have been willing to pay 28 dollars for every dollar in earnings a company makes.
Industry Group Rank
An industry group index is a composite of individual stocks, and thus acts like a "mini" stock market. We look at the money flow institutions into and out of each industry group as a barometer of groups ready to rise or fall, respectively.
Industry Group Score
We grade each industry group based on the week-after-week investment activity in the group. A group may have a good rank one day and a poor one the next so our Industry Group Score takes a longer term view of the investing trends not visible just by looking at any one day's activity.
Forecast Grade
An overall assessment of the company's future potential based on the following data:
Wall Street Earnings Estimates
Earnings are the key to ongoing stock price increases. We study analysts’ estimates for a company's forecasted earnings. We want to see that analysts' continue to grow quarter-over-quarter and year-over-year and that the company is consistently meeting them. The more analysts who follow the stock, the better. the company will make going into the future.
Company vs. Industry
Every company is part of an Industry Group which is a grouping of all the other companies that are related in the products/services they produce. We compare each company's earning per share with their competition looking for those companies that are above average for their industry group.
Return on Equity (ROE)
ROE is a good indicator of the quality of a company's upper management and strategic abilities. We rate those companies that are above the national average for ROE higher than those that are below.
Revenues
Companies are in business to make money. We want companies that have consistent revenue growth with increasing earnings per share.
Performance Grade
An overall assessment of the company's past performance based on the following data:
Company vs. Industry
Every company is part of an Industry Group which is a grouping of all the other companies that are related in the products/services they produce. We compare each company's earning per share with their competition looking for those companies that are above average for their industry group.
Return on Equity (ROE)
ROE is a good indicator of the quality of a company's upper management and strategic abilities. We rate those companies that are above the national average for ROE higher than those that are below.
Revenues
Companies are in business to make money. We want companies that have consistent revenue growth with increasing earnings per share.
EPS (Earnings Per Share)
We look for companies that increase their earnings year after year. Additionally, we grade companies the highest if their EPS increase percentage is greater than their revenue.
Other considerations
These factors are not specifically provided, but are used when assigning our final rankings.
Accumulation/Distribution
We want to see stocks that are rising in price on increasing volume. If there is high volume in a stock and the price of the stock is closing near its high, this means that investors are accumulating or buying stock. If there is high volume in a stock and the price of the stock is closing near its low, this means that investors are distributing or selling the stock.
Cash Flow Growth
We want the cash flow growth to be positive over the last five years. When companies are able to have a positive cash flow, they are able to put this positive number towards developing new products, improving upon existing products, and to continue to grow as a company.
Debt/Equity Ratio
The "Debt/Equity Ratio" compares the amount of debt to the amount of equity a company has. Obviously, the lower the ratio the better.
Insider Trading
Insider Trading is defined as the buying or selling of a security by insiders who possess material, nonpublic information about the security insider trading net number of insiders buying or selling a stock. There are many reasons why an insider might sell their stock, but only ONE reason why they would buy - the price is expected to rise.