Financial Terms Glossary

P/E Ratio (Price-to-Earnings)

Stock Price ÷ Earnings Per Share

Shows how much investors are willing to pay for each dollar of earnings. A P/E of 20 means investors pay $20 for every $1 of annual profit. Trailing P/E uses the last 12 months of actual earnings; Forward P/E uses analysts' estimates for the next 12 months. Lower P/E may indicate a bargain (or a struggling company); higher P/E may indicate growth expectations (or overvaluation). Compare within the same industry for meaningful insights.

Forward P/E

Stock Price ÷ Estimated Future EPS

Uses projected earnings for the next 12 months instead of historical data. If the forward P/E is significantly lower than the trailing P/E, analysts expect earnings growth. If higher, they expect earnings to decline.

P/B Ratio (Price-to-Book)

Stock Price ÷ Book Value Per Share

Compares the market's valuation to the company's accounting (book) value. A P/B below 1.0 means the market values the company at less than the net value of its assets — potentially a bargain for value investors. Most growth companies have P/B ratios well above 1.0 because their value comes from intangibles like brand, IP, and growth potential.

P/S Ratio (Price-to-Sales)

Market Cap ÷ Total Revenue

Useful for valuing companies that aren't yet profitable (e.g., high-growth tech). A lower P/S suggests you're paying less per dollar of revenue. Best compared within the same industry, as margins vary enormously between sectors.

EV/EBITDA (Enterprise Value to EBITDA)

Enterprise Value ÷ EBITDA

A more comprehensive valuation metric than P/E because it accounts for debt and cash. Enterprise Value = Market Cap + Total Debt − Cash. EBITDA strips out non-operating factors. Lower EV/EBITDA suggests the company might be undervalued. Widely used in M&A (mergers & acquisitions) to compare companies with different capital structures.

EV/EBIT

Enterprise Value ÷ EBIT

Similar to EV/EBITDA but includes depreciation and amortization, making it stricter. Preferred by some analysts for capital-intensive businesses where depreciation represents real ongoing costs.

Graham's Fair Value

√(22.5 × EPS × BVPS)

Benjamin Graham's formula for estimating intrinsic stock value. Combines earnings power (EPS) with asset backing (Book Value Per Share). The constant 22.5 comes from Graham's P/E ceiling of 15 multiplied by his P/B ceiling of 1.5. Works best for mature, profitable companies. Read the full guide →

Market Capitalization (Market Cap)

Stock Price × Total Shares Outstanding

The total market value of a company's shares. Used to categorize companies: Mega-cap ($200B+), Large-cap ($10B–$200B), Mid-cap ($2B–$10B), Small-cap ($300M–$2B), Micro-cap (under $300M). Larger companies are generally more stable; smaller companies offer higher growth potential with more risk.

EPS (Earnings Per Share)

Net Income ÷ Shares Outstanding

The portion of a company's profit allocated to each outstanding share. It's the single most important metric for calculating P/E ratio and Graham's Fair Value. Rising EPS over time is a positive sign. Compare trailing EPS (actual) vs. forward EPS (estimated) to gauge expected growth.

ROE (Return on Equity)

Net Income ÷ Shareholders' Equity × 100

Measures how efficiently a company uses shareholder money to generate profit. An ROE of 15% means the company earns $0.15 for every $1 of equity. Generally, ROE above 15% is considered strong. Very high ROE (30%+) can indicate either excellent management or very high leverage — check the debt levels.

ROIC (Return on Invested Capital)

NOPAT ÷ Invested Capital × 100

Measures how well a company generates returns from all capital invested (both equity and debt). NOPAT is Net Operating Profit After Tax. ROIC above the company's cost of capital means it's creating value; below means it's destroying value. Many consider ROIC the best single measure of a company's quality.

ROA (Return on Assets)

Net Income ÷ Total Assets × 100

Shows how efficiently a company uses its assets to generate profit. ROA above 5% is generally good, but this varies enormously by industry. Asset-heavy businesses (manufacturing, banking) typically have lower ROA than asset-light businesses (software, consulting).

Net Profit Margin

Net Income ÷ Revenue × 100

The percentage of revenue that becomes profit after all expenses, taxes, and interest. A net margin of 20% means the company keeps $0.20 from every dollar of revenue. Software companies often have 25%+ margins; retailers may operate on 2-5%. Consistently expanding margins are a bullish signal.

Gross Margin

(Revenue − Cost of Goods Sold) ÷ Revenue × 100

Shows the profitability of a company's core products/services before operating expenses. High gross margins (60%+) suggest strong pricing power or a differentiated product. Declining gross margins may indicate rising input costs or pricing pressure from competitors.

Operating Margin

Operating Income ÷ Revenue × 100

The percentage of revenue remaining after paying for both production costs and operating expenses (salaries, rent, R&D). It excludes interest and taxes. A company can have high gross margins but low operating margins if it spends heavily on R&D or sales — common in growth-stage tech companies.

EBITDA

Earnings Before Interest, Taxes, Depreciation & Amortization

A proxy for the cash-generating ability of a company's operations. By stripping out non-cash charges (depreciation, amortization) and financing decisions (interest, taxes), EBITDA lets you compare the operational profitability of companies regardless of their capital structure or accounting choices.

Book Value Per Share (BVPS)

Total Shareholders' Equity ÷ Shares Outstanding

The net asset value of a company on a per-share basis. It represents what shareholders would theoretically receive if the company liquidated all assets and paid all debts. Used in Graham's Fair Value formula and P/B ratio calculations. Learn more about balance sheets →

Equity-to-Assets Ratio

Shareholders' Equity ÷ Total Assets × 100

Shows what percentage of the company's assets is financed by shareholders rather than creditors. A higher ratio means lower financial risk. A ratio of 50% means half the assets are funded by equity and half by debt. Banks typically have very low ratios (8-12%) while tech companies may be 60%+.

Liabilities-to-Assets Ratio

Total Liabilities ÷ Total Assets × 100

The inverse of equity-to-assets. Shows what portion of assets is funded by debt. A ratio above 70% indicates high leverage and potential financial fragility. During recessions, highly leveraged companies are more likely to face financial distress.

Price-to-Assets

Market Cap ÷ Total Assets

Shows how the market values the company relative to its total asset base. A low ratio might indicate an undervalued asset-heavy company. Particularly useful for comparing financial institutions and real estate companies.

Dividend Yield

Annual Dividend Per Share ÷ Stock Price × 100

The annual return you'd receive from dividends alone at the current price. A yield of 3% means a $100 investment generates $3 per year in dividends. Higher yields can be attractive but extremely high yields (8%+) may signal a company in distress (the price has dropped, inflating the yield). The S&P 500 average yield is historically around 1.5-2%.

Payout Ratio

Dividends Paid ÷ Net Income × 100

The percentage of earnings distributed as dividends. A payout ratio of 40% means the company distributes 40% of profits and retains 60% for reinvestment. A ratio above 80% may be unsustainable if earnings dip. Growth companies typically have low payout ratios (or none); mature companies tend to be higher.

Ex-Dividend Date

The cutoff date for receiving the next dividend. If you buy the stock on or after this date, you won't receive the upcoming dividend payment. The stock price typically drops by roughly the dividend amount on the ex-dividend date.

Operating Cash Flow

Cash generated from the company's normal business operations. Unlike net income, it strips out non-cash items like depreciation and changes in working capital. Positive operating cash flow is essential — a company can report profits on paper but still run out of cash if it can't actually collect payments.

Free Cash Flow (FCF)

Operating Cash Flow − Capital Expenditures

The cash left after a company has paid for its operations and capital investments. This is the money available for dividends, share buybacks, debt repayment, or acquisitions. Many professional investors consider free cash flow more important than reported earnings because it's harder to manipulate and represents real cash.

Capital Expenditure (CapEx)

Money spent on long-term assets like buildings, equipment, and technology infrastructure. High CapEx relative to revenue can indicate a company investing for future growth — or one that requires constant reinvestment just to maintain operations (e.g., airlines, telecoms).

CAGR (Compound Annual Growth Rate)

(End Value ÷ Start Value)^(1/years) − 1

The smoothed annual growth rate over a period. Unlike simple averages, CAGR accounts for compounding. WIT shows CAGR for both revenue and profit. A company with 15% revenue CAGR over 5 years has roughly doubled its revenue in that period. Consistent CAGR above 10% is generally impressive for large companies.

YoY Growth (Year-over-Year)

The percentage change in a metric compared to the same period last year. YoY comparisons are preferred over sequential (quarter-over-quarter) because they account for seasonality. A company may have weak Q1 vs Q4, but what matters is whether Q1 this year is better than Q1 last year.

52-Week High / Low

The highest and lowest prices at which a stock has traded over the past year. A stock near its 52-week high may be showing strength (or may be overheated). A stock near its 52-week low may be a bargain (or falling for good reason). WIT shows both on every stock detail page.

VIX (Volatility Index)

The CBOE Volatility Index, often called the "fear gauge." It measures expected market volatility over the next 30 days based on S&P 500 options pricing. VIX below 15 = calm markets (greed); VIX above 30 = high uncertainty (fear). WIT uses the VIX to power the sentiment gauge on the dashboard. Read the full guide →

Bull Market / Bear Market

A bull market is a sustained period of rising stock prices (typically 20%+ from a recent low). A bear market is the opposite — a decline of 20% or more from a recent high. The terms come from how each animal attacks: bulls thrust upward with their horns, bears swipe downward with their paws.

Sector Rotation

The movement of investment capital between industry sectors as economic conditions change. During expansions, cyclical sectors (tech, financials) tend to lead. During contractions, defensive sectors (utilities, staples) outperform. WIT's sector heatmap helps you spot rotation in real time. Read the full guide →

ETF (Exchange-Traded Fund)

A fund that trades on a stock exchange like a regular stock. ETFs typically track an index, sector, or commodity. For example, SPY tracks the S&P 500, and XLK tracks the technology sector. They provide instant diversification at low cost and are the building blocks used by WIT's sector heatmap.

Stock Index

A measurement of a section of the stock market. The S&P 500 tracks 500 large US companies, the NASDAQ Composite is tech-heavy, and the Dow Jones Industrial Average tracks 30 blue-chip stocks. Indexes are used as benchmarks to measure investment performance. WIT tracks major global indexes on the dashboard.