Term Glossary

Compare P/E to peers in the same industry - a 'high' or 'low' P/E only makes sense in context.

A rapidly falling Forward P/E (price stays flat, earnings estimates rise) is often a bullish sign.

PEG is most useful for comparing growth stocks - it levels the playing field between slow and fast growers.

P/B is less useful for tech and services companies whose main assets are intangible (software, talent, brand).

P/S ignores profitability - a company with great revenue but terrible margins can still be a bad investment.

Market cap tells you size, not value. A $1T company can still be a bargain - or a $1B company can be wildly overvalued.

Trending EPS matters more than a single number - look for consistent year-over-year growth.

Be cautious of very high ROE driven by heavy debt (leverage artificially inflates it). Check debt levels alongside ROE.

Compare profit margins within the same industry - a 5% margin is great for a retailer but terrible for a software company.

"Cash is king" - FCF is what pays dividends and buybacks. Earnings can be an illusion; FCF is real.

Context matters: utilities and banks naturally carry high D/E, while tech companies typically run low.

Beta is a tool for risk management, not stock picking. Low-Beta stocks aren't automatically better investments.

High short interest isn't automatically bearish - a strong earnings surprise can trigger a short squeeze and rocket the price.

Rising institutional ownership over time can signal growing conviction. Watch SEC 13F filings for institutional moves.

The 52W range provides context, not a buy/sell signal by itself. Always pair with fundamentals.

Decelerating revenue growth (e.g., from 50% to 25% to 10%) is often a warning sign even if growth is still positive.

Long-run stock prices tend to track earnings growth. A company that grows EPS at 15%/yr will likely see its stock appreciate similarly over time.

A high, sustainable dividend yield with a growing payout history is a hallmark of quality income investments.

"The trend is your friend." In a bull market, broadly diversified stock exposure tends to outperform most active strategies.

Every bear market in U.S. history has been followed by a bull market that reached new all-time highs. Long-term investors stay the course.

Diversifying across sectors reduces the risk that one industry's downturn wipes out your portfolio.

SWOT is a starting point, not a verdict. Use it to frame questions: Is management capitalizing on opportunities? Are the threats existential or manageable?

DCA removes the pressure of timing the market. It's the strategy most financial advisors recommend for long-term investors building wealth.

As the saying goes: don't put all your eggs in one basket. True diversification means assets that genuinely behave differently - not 20 tech stocks.