Company Profile

Stock market and investing glossary

60 terms that appear on this site, and in any stock analysis, explained in a few sentences, each with an example and a link to where you can see it here.

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8-K

The current report a company files with the SEC when a material event happens: results, management changes, acquisitions, major agreements… It generally has to be filed within four business days of the event. The quarterly earnings release usually arrives as an 8-K (Item 2.02) before the 10-Q, and it is the one that moves the stock.

Example. JPMorgan filed the 8-K with its results on July 14, 2026, before the open, and the 10-Q 23 days later.

On this site: Guide: 10-K, 10-Q and 8-K earnings dates Article: From 26.4% to 3.0%

10-K

The annual report that US-listed companies file with the SEC. It contains the audited financial statements for the fiscal year, the business description, the risk factors and management's discussion of the results. The deadline is 60 days after fiscal year-end for large accelerated filers and 75 or 90 days for the rest.

Example. JPMorgan closed its fiscal year on December 31, 2025 and filed its 10-K on February 13, 2026, 44 days later.

On this site: Guide: 10-K, 10-Q and 8-K company page (e.g. Apple)

Related: 10-Q 8-K SEC and EDGAR

10-Q

The quarterly report filed with the SEC for the first, second and third quarters of the fiscal year; the fourth is covered by the 10-K. It includes the quarter's balance sheet, income statement and cash flows, reviewed by the auditor but not audited. The deadline is 40 days after quarter-end for large accelerated filers and 45 for the rest.

Example. Apple closed its third fiscal quarter on June 27, 2026 and filed its 10-Q on July 31.

On this site: Guide: 10-K, 10-Q and 8-K company page (e.g. Apple)

Related: 10-K 8-K Earnings release

10b5-1 plan

A written plan in which an insider sets in advance when and how much they will buy or sell, at a time when they have no material non-public information; afterwards the trades run on their own. Since the reform the SEC adopted at the end of 2022, directors and officers must wait at least 90 days between adopting the plan and the first trade, or until two business days after that quarter's results are filed if later, up to a maximum of 120 days. On Form 4, a checkbox shows whether the trade was made under such a plan.

Example. A sale flagged as 10b5-1 was decided months earlier: it says less about the insider's current view than a sale that is not.

On this site: Guide: Insider buying insider alerts

Related: Form 4 Insider

Alpha (Jensen's alpha)

The part of a portfolio's return that is not explained by the market risk it took. It is the portfolio's return minus the return its beta called for: the risk-free rate plus beta times what the market earned above that rate. A positive alpha means the portfolio beat what its beta predicted over that period; it says nothing about whether that will happen again. On this site, the alpha of the model portfolios is measured against the equal-weight S&P 500.

Formula: alpha = Rp − [Rf + β × (Rm − Rf)]

Example. A portfolio with a beta of 1.2 that returns 12% a year, with a 4% risk-free rate and a market that returns 10%: its beta called for 4 + 1.2 × (10 − 4) = 11.2%, so its alpha is 0.8 points.

On this site: model portfolios Methodology, §6: the walk-forward

Backtest

A simulation that applies an investing rule to past data to see what would have happened. It is useful for discarding ideas and for learning a strategy's risk, but it is easy to fool yourself: with data that was not available at the time, with only the companies that survived to this day, or by trying many variants until one works. That is why a backtest result is hypothetical, not a return anyone earned, and past performance does not guarantee future results.

Example. The curves of this site's model portfolios are a backtest: they rebuild, rebalance by rebalance, what the rule would have done with what was known on each date, and they include no costs.

On this site: Methodology, §6: the walk-forward model portfolios simulator

Beta

How much a stock or a portfolio moves when the market moves. A beta of 1 moves with the market; 1.5 tends to rise and fall 50% more; 0.5, half as much. It is the covariance of its returns with the market's divided by the market's variance, so it only captures market-related risk, not the company's own. The beta on each company page is the one published by the market data provider; the model portfolios' beta is measured against the equal-weight S&P 500.

Formula: β = covariance(Rp, Rm) / variance(Rm)

Example. With a beta of 1.3, if the market falls 10%, the beta alone points to a drop of about 13%; the stock may do something else for reasons of its own.

On this site: company page (e.g. Apple)model portfolios Methodology, §6: the walk-forward

Bid-ask spread

The gap between the best price someone is willing to pay (the bid) and the best price someone is willing to sell at (the ask) at a given moment. It is a hidden cost: whoever buys and sells right away loses the spread even if the price does not move. For the large S&P 500 companies it is usually very small; for small stocks or in stressed markets it widens.

Formula: spread = ask − bid

Example. With a bid of $99.98 and an ask of $100.02, the spread is 4 cents, or 0.04%.

On this site: Methodology, §7: costs

Related: Turnover Backtest

CAGR (compound annual growth rate)

The constant yearly return that turns the starting value into the ending value over the same number of years. It sums up a period of good and bad years in one figure, but it hides the path: two portfolios with the same CAGR may have gone through very different drawdowns. That is why it is read alongside maximum drawdown and volatility.

Formula: CAGR = (ending value / starting value)^(1 / years) − 1

Example. $10,000 that becomes $20,000 in 7 years is a CAGR of 10.4%: 2^(1/7) − 1.

On this site: Guide: Sharpe ratio, max drawdown and CAGR model portfolios Methodology, §6: the walk-forward

Calmar ratio

The compound annual return divided by the maximum drawdown. It measures how much a strategy returned for each point of its worst fall. Its original definition used the last 36 months; this site computes it over the selected period, with the maximum drawdown measured day by day.

Formula: Calmar = CAGR / |maximum drawdown|

Example. A 12% CAGR with a 30% maximum drawdown gives a Calmar ratio of 0.4.

On this site: model portfolios Methodology, §6: the walk-forward

Dividend yield

The dividends a share pays in a year divided by its price. A very high yield may be there because the price has fallen as the market doubts the dividend will be kept. It does not include the rise or fall of the price.

Formula: dividend yield = annual dividends per share / price

Example. A $50 stock that pays $2 a year has a 4% dividend yield.

On this site: company page (e.g. Apple)

Related: Ex-dividend date Total return

Earnings release

The announcement in which a listed company publishes the figures for its latest quarter: revenue, earnings and often guidance. In the US it arrives as an 8-K, before the open or after the close, and the full accounts follow in the 10-Q or 10-K. The price reacts mostly to the gap between what was reported and what the market expected, not to whether the figures are good or bad in themselves.

Example. A company that reports on Tuesday after the close will see the price reaction in Wednesday's session.

On this site: earnings dates who reports this week Apple earnings Article: From 26.4% to 3.0%

Related: 8-K 10-Q

EBITDA

Earnings before interest, taxes, depreciation and amortization. It approximates what the business generates from its operations, before how it is financed and how the wear of its assets is accounted for. It is not a cash flow: it does not subtract the investment needed to maintain the business or changes in working capital. And it is not a figure defined by US accounting rules (US GAAP), so each company can compute it its own way.

Formula: EBITDA ≈ operating income + depreciation and amortization

Example. Operating income of $8 billion plus $2 billion of depreciation and amortization gives EBITDA of about $10 billion.

EPS (earnings per share)

The net income that belongs to each share: what the company earned for its common shareholders divided by the average number of shares in the period. Diluted EPS also counts the shares that options or convertible bonds could create, so it is usually equal to or slightly below basic EPS. It is the basis of the P/E ratio and, on this site, it feeds the value factor (trailing twelve-month EPS over price) and the growth factor (its year-on-year change).

Formula: EPS = (net income − preferred dividends) / average shares outstanding

Example. A company that earns $10 billion with 2 billion shares has EPS of $5.

On this site: Guide: P/E ratio explained Methodology, §4: the four factors

Equal weight

A portfolio or index in which every company has the same weight, whatever its size. The classic S&P 500 weights by market cap, so the largest companies weigh far more; its equal-weight version gives each one about 0.2% and is rebalanced periodically. This site's model portfolios are equal-weighted and are compared with the equal-weight S&P 500: the equal-weighted average of the companies that were in the index on each date.

Example. In an equal-weight portfolio of 20 companies, each one weighs 5% after every rebalance.

On this site: model portfolios Methodology, §6: the walk-forward

ETF (exchange-traded fund)

An investment fund that trades on the stock exchange like a share and usually tracks an index. It lets you buy hundreds of companies at once with low management fees. US-domiciled ETFs such as SPY are generally not available to retail investors in the European Union, because they do not publish the key information document (KID) that EU rules require; Europeans use UCITS versions, domiciled for instance in Ireland.

Example. A UCITS ETF on the S&P 500 holds the roughly 500 companies of the index in their weights: one purchase buys the whole index.

On this site: Guide: Investing in the S&P 500

Ex-dividend date

The first day a stock trades without the right to the next dividend: whoever buys on that day or later does not receive it. On that day the price usually opens lower, by roughly the dividend amount, because the share no longer carries it. In the US, since trade settlement moved to one business day (May 2024), the ex-date normally coincides with the record date.

Example. If a company pays $1 per share with Tuesday as the ex-date, a buyer on Monday receives it and a buyer on Tuesday does not.

On this site: Methodology, §6: the walk-forward

Related: Dividend yield Total return

Factor (factor investing)

A measurable company characteristic that decades of research have linked to long-run differences in returns: momentum, value, quality, size, low volatility… Factor investing means ranking companies by that characteristic and keeping the best-scoring ones. No factor wins all the time: all of them spend years behind the market. This site uses four: momentum, value, quality and growth.

Example. A 20-stock momentum portfolio holds the 20 S&P 500 companies with the best momentum and renews them at every rebalance.

On this site: Methodology, §4: the four factors rankings model portfolios

Form 4

The filing an insider must submit to the SEC when they buy, sell or receive shares of their company, within two business days of the transaction. Each line carries a transaction code: P is an open-market purchase, S a sale, A a grant or award, M an option exercise and F shares withheld to pay taxes or the exercise price, among others. A checkbox shows whether the trade was made under a 10b5-1 plan.

Example. A director who buys 10,000 shares on a Monday has until Wednesday to file the Form 4.

On this site: Guide: Insider buying insider alerts insider buying Apple insider trades

Forward P/E

The P/E computed with the earnings analysts expect for the next twelve months or the next fiscal year, instead of the earnings already reported. For companies whose earnings are growing it is usually lower than the trailing P/E, because expected earnings are higher. It depends on forecasts, and forecasts miss.

Formula: forward P/E = price / expected EPS

Example. A $150 stock with trailing EPS of $6 and expected EPS of $7.50 has a P/E of 25 and a forward P/E of 20.

On this site: company page (e.g. Apple)Guide: P/E ratio explained

Free cash flow

The money a company has left after paying for its operations and its investment in assets (capex). It is what it can spend on dividends, share buybacks, paying down debt or buying other companies. It starts from operating cash flow, which is earnings adjusted for non-cash items and changes in working capital, and it is harder to dress up than accounting earnings. It can be negative in years of heavy investment without the business doing badly. On this site, operating cash flow growth is one of the components of the growth factor.

Formula: free cash flow = operating cash flow − capital expenditures (capex)

Example. Operating cash flow of $12 billion with $4 billion of capex leaves free cash flow of $8 billion.

On this site: Methodology, §4: the four factors

Related: EBITDA Growth 10-K

GICS (sector classification)

The Global Industry Classification Standard, created in 1999 by MSCI and S&P to sort listed companies by activity. It has four levels: 11 sectors, 25 industry groups, 74 industries and 163 sub-industries. It is the classification the S&P 500 uses. The sectors shown on this site come from the market data provider and are similar to, but not exactly, the GICS ones: for example, it says “Consumer Cyclical” where GICS says “Consumer Discretionary”.

Example. Under GICS, a software company sits in the Information Technology sector and a bank in the Financials sector.

On this site: company analysis rankings

Related: S&P 500 Stock index

Gross, operating and net margin

How much of each dollar of sales the company keeps at each step of the income statement. Gross margin subtracts the direct cost of what was sold; operating margin also subtracts overhead (staff, sales, research); net margin also subtracts interest and taxes. High, stable margins usually point to pricing power. On this site, gross and operating margins are part of the quality factor.

Formula: margin = profit at that step / revenue

Example. Sales of 100, cost of goods sold of 60 and overhead of 25: a 40% gross margin and a 15% operating margin.

On this site: Methodology, §4: the four factors

Growth

A factor that favors companies whose sales, earnings and cash flow grow faster. This site measures it with three year-on-year growth rates —revenue, EPS and operating cash flow—, using the data that was public on each date, and at least two are required. If last year's base is a loss, that growth rate is not computed: going from losing money to making it is not a percentage.

Formula: growth = today's figure / figure one year ago − 1

Example. Revenue of $50 billion that becomes $55 billion in a year is 10% revenue growth.

On this site: Methodology, §4: the four factors rankings

Insider

Under US rules (section 16 of the Securities Exchange Act of 1934), a company's directors, senior officers and shareholders owning more than 10%. They must report to the SEC their purchases and sales of their own company's stock on Form 4. It should not be confused with insider trading on material non-public information, which is illegal: these reported transactions are legal and public.

Example. When the CEO of an S&P 500 company buys shares of their company on the market, they have two business days to report it on Form 4, and the transaction shows up on this site.

On this site: Guide: Insider buying insider alerts insider buying Apple insider trades

Leverage (debt to equity)

How much a company is financed with debt relative to its shareholders' money. Debt amplifies results both ways: it lifts the return on equity when things go well and raises the risk when they go badly. In this site's quality factor, debt to equity enters inverted: more debt, lower score.

Formula: leverage = debt / shareholders' equity

Example. A company with $30 billion of debt and $60 billion of equity has a leverage of 0.5.

On this site: Methodology, §4: the four factors

Look-ahead bias

Using in a simulation information that was not yet known on the simulated date: accounts filed later, subsequent revisions, future index changes… It makes a backtest look better than what was actually possible. It is avoided with point-in-time data and by respecting the date each figure became public.

Example. Making a February 1 purchase decision with annual accounts the company filed on February 20.

On this site: Methodology, §3: the data and its sources Methodology, §6: the walk-forward

Market capitalization

What a whole company is worth on the stock market: the share price times the number of shares outstanding. It is used to rank companies by size and to weight indexes: in the S&P 500 each company weighs according to its market cap, counting only the freely traded shares (free float). It is not what it would cost to buy the company, which adds debt and subtracts cash: that is enterprise value.

Formula: market cap = price × shares outstanding

Example. A $200 share with 500 million shares outstanding: a market cap of $100 billion.

On this site: company page (e.g. Apple)company analysis

Maximum drawdown

The largest loss from a peak to the low that follows, before that peak is regained. It answers the question “how much could someone who bought at the worst moment have lost?”. It depends on how often it is measured: monthly data hides the worst days. This site measures it day by day.

Formula: drawdown = (trough − previous peak) / previous peak

Example. A portfolio that rises from 100 to 150 and then falls to 90 has a maximum drawdown of 40%: (90 − 150) / 150.

On this site: Guide: Sharpe ratio, max drawdown and CAGR model portfolios Methodology, §6: the walk-forward

Momentum

The tendency of the stocks that rose most over the past months to keep doing better than the rest for a while, and of those that fell most to keep doing worse. It is one of the most studied factors. This site measures it as the return over the past twelve months excluding the most recent one, divided by annualized volatility; the last month is left out because at one month the effect tends to reverse.

Formula: momentum = (price 21 sessions ago / price 252 sessions ago − 1) / annualized volatility

Example. Two stocks that rose 30% over the year: on this site, the one that did it with less volatility has better momentum.

On this site: Guide: Momentum investing Methodology, §4: the four factors rankings

Multifactor

A score or a portfolio that combines several factors at once. On this site, the multifactor score is the average of the momentum, value, quality and growth z-scores, and it is only computed for companies that have all four. Combining factors smooths out the bad years of each one, because they rarely all do badly at the same time.

Formula: multifactor = (Z momentum + Z value + Z quality + Z growth) / 4

Example. A company with z-scores of 1.0, 0.5, 0.2 and −0.3 has a multifactor score of 0.35.

On this site: Methodology, §5: the Z-score rankings model portfolios

Net debt / EBITDA

How many years of EBITDA a company would need to pay off its net debt, which is financial debt minus cash. It is one of the debt measures most used by banks and rating agencies. What counts as high depends on the industry: a business with very stable revenue, such as a utility, can carry more debt than a cyclical one. If cash exceeds debt, net debt is negative. This site does not use this ratio in its factors: it measures debt with debt to equity.

Formula: net debt / EBITDA = (financial debt − cash) / EBITDA

Example. Debt of $20 billion, cash of $5 billion and EBITDA of $6 billion: net debt of 2.5 times EBITDA.

Open-market purchase (code P)

A purchase of shares that an insider makes on the stock market, with their own money and at the market price, and reports on Form 4 with code P. It is the insider transaction that can carry the most information, because it is voluntary: stock grants and option exercises are part of their pay. They are a small share of all reported transactions. A purchase like this does not guarantee that the stock will rise.

Example. An officer who buys 5,000 shares on the market at $80 reports a $400,000 code P transaction.

On this site: insider buying Guide: Insider buying

Related: Form 4 Insider 10b5-1 plan

P/E ratio (price to earnings)

How many times the market pays for a company's annual earnings: the share price divided by earnings per share. A P/E of 20 means that, if earnings stayed the same, it would take 20 years of earnings to match the price. A low P/E can be an opportunity or a sign of a declining business, which is why it makes more sense to compare it with its industry and its own history. It is meaningless when the company is losing money.

Formula: P/E = price / trailing twelve-month EPS

Example. A $150 stock with EPS of $6 has a P/E of 25.

On this site: Guide: P/E ratio explained company page (e.g. Apple)

Percentile

A value's position within a group expressed as a percentage: being in the 90th percentile means beating 90% of the group. It is useful for comparing figures on different scales, because it only looks at the order. This site's rankings give each company's rank among the S&P 500 companies scored that day, which reads in a similar way: rank 50 out of 500 is around the 90th percentile.

Example. If a company's margin beats that of 400 of the 500 in the index, it is in the 80th percentile.

On this site: rankings company page (e.g. Apple)

Related: Z-score

Point-in-time data

Data as it was known on each past date, without later corrections or releases. A quarter's accounts are not known on the day the quarter ends but weeks later, when they are filed, and they are sometimes restated afterwards. Using today's final figure to make a past decision is cheating without meaning to. On this site, each set of accounts is used only from the day it was filed with the SEC.

Example. A quarter that closed on June 30 and was filed on August 1 cannot be used in a July 15 rebalance.

On this site: Methodology, §3: the data and its sources Methodology, §6: the walk-forward

Related: Look-ahead bias Backtest

Price to book (P/B)

The share price divided by book value per share, which is shareholders' equity (assets minus liabilities, per the balance sheet) spread over the shares. Below 1, the market values the company at less than its books say. It is very useful for banks and insurers and much less for companies whose value lies in intangibles the balance sheet does not capture, such as brands or software. On this site, its inverse (book value over price) is one of the three components of the value factor.

Formula: P/B = price / (shareholders' equity / shares)

Example. Equity of $50 billion, 1 billion shares and a $75 price: book value of $50 per share and a P/B of 1.5.

On this site: company page (e.g. Apple)Methodology, §4: the four factors

Related: Value ROE (return on equity)

Quality

A factor that favors profitable companies with high margins and little debt. The idea, studied in academic research, is that the market does not always pay enough for sustained profitability. This site measures it with five ratios —ROE, ROA, gross margin, operating margin and debt to equity, the last one inverted—, each normalized and then averaged; at least three are required.

Example. Two companies with the same ROE: the one that gets there with little debt and high margins scores better on quality than the one that gets there by borrowing.

On this site: Methodology, §4: the four factors rankings model portfolios

Rebalancing

Reviewing a portfolio at set intervals to bring it back to its rule: selling what no longer meets it, buying what now does and resetting the weights. Rebalancing more often tracks the signal more closely, but it generates more turnover and more costs. This site's model portfolios are rebalanced every 21 trading sessions, roughly once a month.

Example. If after a month one of the 20 companies in an equal-weight portfolio weighs 7% because it rose, rebalancing takes it back to 5%.

On this site: Methodology, §6: the walk-forward model portfolios

Related: Turnover Equal weight

Risk-free rate

The return on an investment considered free of default risk, usually short-term government debt. It is the yardstick for whether taking risk was worth it: the Sharpe and Sortino ratios, alpha and the Treynor ratio all subtract it. This site uses each day's 13-week US Treasury bill rate, which has ranged from almost 0% to about 5% depending on the year.

Example. If the three-month bill pays 4% a year, a portfolio that returns 6% has only earned 2 points for taking risk.

On this site: Methodology, §6: the walk-forward

ROA (return on assets)

Net income divided by total assets: how much the company earns on everything it has, whether financed with debt or equity. It is harder to inflate with debt than ROE. Banks have low ROAs, around 1%, because they run very large balance sheets. On this site it is one of the five ratios of the quality factor.

Formula: ROA = net income / total assets

Example. Net income of $4 billion on $80 billion of assets: an ROA of 5%.

On this site: Methodology, §4: the four factors

ROE (return on equity)

Net income divided by shareholders' equity: how much the company earns on its shareholders' money. A high, sustained ROE usually points to a good business, but it can also come from heavy debt or from equity shrunk by buybacks, so it is worth reading next to leverage. With negative equity it is meaningless. On this site it is one of the five ratios of the quality factor.

Formula: ROE = net income / shareholders' equity

Example. Net income of $6 billion on $30 billion of equity: an ROE of 20%.

On this site: Methodology, §4: the four factors rankings

ROIC (return on invested capital)

Operating profit after tax (NOPAT) divided by the capital invested in the business, which adds debt and equity, usually net of cash. It measures how well the company turns the money put to work into profit, however it is financed. If it stays above the company's cost of capital, growth creates value. There is no single official formula: each source adjusts invested capital its own way. This site does not compute it: its quality factor uses ROE and ROA.

Formula: ROIC = operating income × (1 − tax rate) / (debt + equity − cash)

Example. NOPAT of $3 billion on $20 billion of invested capital: an ROIC of 15%.

On this site: Methodology, §4: the four factors

S&P 500

The index of about 500 of the largest US listed companies, run by S&P Dow Jones Indices. It weights each company by its float-adjusted market cap, so the largest ones weigh far more. Not just anyone gets in: a committee decides additions and deletions using size, liquidity and profitability criteria, and its membership changes every year. It has slightly more than 500 stocks because some companies trade with two share classes.

Example. Alphabet trades with two share classes, GOOGL and GOOG, and both are in the index.

On this site: Guide: Investing in the S&P 500 company analysis Methodology, §2: the universe

SEC and EDGAR

The SEC (Securities and Exchange Commission) is the US securities market regulator. EDGAR is its free public database, where listed companies file their reports (10-K, 10-Q, 8-K) and insiders their transactions (Form 4). Each filer has a fixed number, the CIK, which is more reliable than the ticker for following a company over time. It is the primary source of the financial statements and insider transactions this site uses.

Example. Anyone can look up a company's latest 10-K on EDGAR by name, ticker or CIK; Apple's is 0000320193.

On this site: Methodology, §3: the data and its sources Guide: 10-K, 10-Q and 8-K

Sharpe ratio

The return an investment earns above the risk-free rate per unit of volatility. William Sharpe proposed it in 1966. It lets you compare strategies with different risk: a higher Sharpe means more return for the same swings. It treats sharp rises and sharp falls alike, and with only a few years of data it is very unstable.

Formula: Sharpe = (return − risk-free rate) / volatility, annualized

Example. A portfolio returning 12% a year, with a 4% risk-free rate and 16% volatility, has a Sharpe ratio of 0.5.

On this site: Guide: Sharpe ratio, max drawdown and CAGR model portfolios Methodology, §6: the walk-forward

Short interest

The number of a company's shares that have been sold short and not yet bought back, often expressed as a percentage of the freely traded shares. A high percentage means many investors are betting on a fall. In the US it is published twice a month and with a lag, so it is always a few weeks old; that is why the company page shows it with its date.

Example. A 5% short interest means shares equal to 5% of the float have been sold short.

On this site: company page (e.g. Apple)

Related: Market capitalization

Sortino ratio

A variant of the Sharpe ratio that only penalizes downside volatility. It divides the return above the risk-free rate by the downside deviation, which only counts the periods below that threshold. That way a strategy with strong rises and few falls is not penalized for its rises. It is named after Frank Sortino.

Formula: Sortino = (return − risk-free rate) / downside deviation

Example. Of two portfolios with the same Sharpe ratio, the one whose volatility comes mostly from rises has the higher Sortino ratio.

On this site: model portfolios Methodology, §6: the walk-forward

Related: Sharpe ratio Maximum drawdown

Stock index

A number that tracks a group of stocks according to public rules: which companies are in and how much each one weighs. It cannot be bought directly; people invest in it through funds or ETFs that track it. Some are weighted by market cap, like the S&P 500; some by price, like the Dow Jones Industrial Average; some equally.

Example. If the S&P 500 goes from 6,000 to 6,300 points, its companies, in their weights, rose 5% excluding dividends.

On this site: Guide: Investing in the S&P 500

Stock split

Dividing each share into several: in a 10-for-1 split, each share becomes ten and the price becomes a tenth. The value of the company and of each shareholder's stake do not change; the share just becomes cheaper and easier to handle. A reverse split does the opposite: it merges several shares into one. Historical prices are adjusted so the chart does not show a fall that never happened.

Example. NVIDIA did a 10-for-1 split in June 2024: someone who held one share of about $1,200 ended up with ten of about $120.

On this site: company page (e.g. Apple)

Survivorship bias

The mistake of studying the past with only the companies that still exist today. Those that went bust, were taken over or left the index drop out of the sample, and with them many of the worst investments, so the result looks better than it was. An honest backtest uses, on each date, the list of companies that were in the index that day. Measured on this site, using today's list inflated its portfolios' returns by 13 points a year between 2021 and 2026.

Example. A study of the S&P 500 since 2010 built with today's index members includes the companies that joined later because they rose, and leaves out those that left because they fell.

On this site: Methodology, §2: the universe Article: We lowered our own published returns, and here is why

Ticker (stock symbol)

The short code a stock trades under, such as AAPL for Apple or MSFT for Microsoft. It can change if the company changes its name, and a ticker that falls out of use can end up assigned to another company. That is why a company's SEC number, the CIK, is more reliable for following it over time.

Example. Meta Platforms went from trading as FB to trading as META in June 2022.

On this site: company analysis

Related: SEC and EDGAR

Total return

What an investment earns counting both the price change and the dividends received, usually reinvested. It is the right way to compare strategies: ignoring dividends penalizes companies that pay out a lot. Many indexes publish both a price version and a total return version. On this site, the portfolio curves are total return: they count the dividends whose ex-date falls within each period.

Formula: total return = (ending price − starting price + dividends) / starting price

Example. A stock that goes from $100 to $104 and pays $3 of dividends during the year has a 7% total return.

On this site: Methodology, §6: the walk-forward model portfolios

Treynor ratio

The return above the risk-free rate divided by beta. It resembles the Sharpe ratio, but it measures risk only as market exposure rather than total volatility, so it makes most sense for diversified portfolios, where each company's own risk washes out. Jack Treynor proposed it in 1965.

Formula: Treynor = (return − risk-free rate) / beta

Example. A 12% return, a 4% risk-free rate and a beta of 1.1 give a Treynor ratio of 0.07: about 7 points per unit of beta.

On this site: model portfolios

TTM (trailing twelve months)

A figure that adds up the last four reported quarters, whatever the company's fiscal calendar. It gives an up-to-date annual number without waiting for fiscal year-end.

Example. In August, the TTM EPS of a company with a calendar fiscal year adds last year's third and fourth quarters and this year's first and second.

On this site: Methodology, §4: the four factors

Turnover

The share of a portfolio that is replaced in a period. Each change is a sale and a purchase, and each trade pays commission and spread and may trigger taxes. A high-turnover strategy needs a larger gross edge to keep something after costs. This site's methodology measures each portfolio's turnover and what it would cost.

Example. A 20-stock portfolio that replaces 5 companies a month turns over 25% monthly, on the order of 300% a year.

On this site: Methodology, §7: costs

Related: Bid-ask spread Rebalancing

Value

A factor that favors stocks that are cheap relative to what the company earns, sells or holds on its books. The idea is that the market overdoes its pessimism about some companies and, over time, the price tends to correct. This site measures it with three yields on the price —trailing twelve-month EPS, book value per share and sales per share, each divided by the price— and at least two are required.

Formula: earnings yield = EPS / price = 1 / P/E

Example. A company with a P/E of 10 has an earnings yield of 10%, and one with a P/E of 40, 2.5%: the first scores better on value.

On this site: Guide: Value investing Methodology, §4: the four factors rankings

Volatility

How much an investment's return swings around its average, measured with the standard deviation. It is usually annualized: with daily data, multiply by the square root of 252, the sessions in a year. It does not tell rises from falls and it is not the same as maximum drawdown: it measures the usual swings, not the worst moment.

Formula: annual volatility = daily standard deviation × √252

Example. A daily standard deviation of 1% is equivalent to an annual volatility of about 15.9%.

On this site: model portfolios Methodology, §4: the four factors

Walk-forward testing

A way of running a backtest that moves through time as a real investor would have: on each date decisions use only what was available up to that day, the portfolio is held until the next date and the process repeats, with the same rules in every period. It avoids tuning the strategy on results that were not known at the time.

Example. At each rebalance of the model portfolios, companies are scored with prices up to that session and accounts already filed, the top N are taken and the test moves forward 21 sessions.

On this site: Methodology, §6: the walk-forward model portfolios

Related: Backtest Point-in-time data

Z-score

How many standard deviations a value sits from its group's average. 0 is the average; +1, one standard deviation above; −2, two below. It lets you add up figures on different scales, such as a margin and an earnings yield. On this site, each component of each factor is turned into a z-score against that day's S&P 500 companies, capped at ±3.

Formula: z = (x − mean) / standard deviation

Example. If the index's average ROE is 15% with a standard deviation of 10 points, a company with a 30% ROE has a z-score of 1.5.

On this site: Methodology, §5: the Z-score company page (e.g. Apple)rankings

Related: Percentile Multifactor

To go further: the guides, the Academy course and the Methodology, with every formula and source on this site.

An educational glossary: it explains concepts; it is not an investment recommendation and takes no one's circumstances into account. Examples with round numbers are illustrative; this site's portfolio results are historical simulations and past performance does not guarantee future returns.