Investing glossary in plain language
The terms that come up most when analysing a stock, explained in a few lines, with what to look at next.
- P/E (price / earnings)How many years of current earnings you're paying for.
- P/FCF (price / free cash flow)Like the P/E, but uses the cash that's actually left over (free cash flow) instead of accounting profit.
- Free cash flow (FCF)The cash left over after paying for day-to-day operations and investments (capex).
- FCF yieldFree cash flow divided by market cap: how much cash each euro invested at today's price “earns”.
- ROICReturn on invested capital: how much the company earns for each euro invested in the business.
- ROEProfit relative to the shareholders' money (equity).
- Diluted EPS (earnings per share)Net income divided by the number of shares.
- EV/EBITDAThe value of the whole company (shares + net debt) divided by EBITDA.
- Net marginThe percentage of sales kept as bottom-line profit, after all costs, interest and taxes.
- Debt / EquityHow large the debt is relative to the shareholders' money.
- Market capWhat the company is worth on the stock market: share price × number of shares.
- BetaHow much the stock tends to move compared with the market (S&P 500).
- Dividend yieldHow much the company pays you in dividends each year, as a % of the share price.
- Payout ratioThe share of profit paid out as dividends.
- Margin of safetyA discount to the intrinsic value that protects you from mistakes in your assumptions.
- Intrinsic valueWhat the share is worth according to the model, based on the cash the company will generate in the future, discounted to today's value.
- Cerne scoreA 0–100 score built on 5 pillars: quality (profitability and consistency), growth, financial strength (debt), valuation (price vs.