Glossary of stock market terms

Plain-English definitions for every metric on this site

Financial data comes wrapped in jargon, and most of it is never explained. Every figure Major Stock Signals shows is defined below in ordinary language — what it measures, how it's calculated, and what it does and doesn't tell you.

These definitions are descriptive. They explain what a metric is, never what to do about it. See our methodology for how the projections are built, and the terms of use for the disclaimer that applies to all of it.

Technical indicators

Descriptions of how a share price has behaved recently. All are derived from past prices alone, so none of them forecast anything.

RSI (Relative Strength Index): Relative Strength Index: momentum on a 0–100 scale, from the size of recent gains versus losses. Readings above 70 are conventionally called overbought and below 30 oversold — descriptions of recent price behaviour, not signals.
50-day moving average: The average closing price over the last 50 trading days — a common medium-term trend reference. Price above it is often described as short-term strength.
200-day moving average: The average closing price over the last 200 trading days, used as a long-term trend reference.
Golden cross / death cross: Compares the 50-day and 200-day averages. The 50 rising above the 200 is nicknamed a "golden cross"; falling below is a "death cross". Both are descriptions of past price, not forecasts.
MACD: Moving Average Convergence Divergence: the gap between the 12-day and 26-day exponential moving averages, compared against a 9-day signal line. Used to describe momentum shifts.
MACD histogram: The MACD line minus its signal line. Positive means MACD sits above the signal line; the bar size shows the gap.

Valuation and company metrics

Ratios that relate a company’s market price to what the business actually earns and owns.

P/E ratio: Price-to-earnings: share price divided by earnings per share. Higher values mean investors are paying more per dollar of current profit.
P/S ratio: Price-to-sales: market value divided by annual revenue. Often used when a company has little or no profit.
P/B ratio: Price-to-book: market value divided by the accounting value of net assets.
EPS (trailing twelve months): Earnings per share over the trailing twelve months — profit divided by shares outstanding.
Beta: How much the share price has moved relative to the wider market. Around 1 means it moved roughly in line; above 1 means larger swings, below 1 smaller.
Return on equity: Return on equity: profit as a percentage of shareholders’ equity — how efficiently the company turns equity into profit.
Gross margin: Gross profit as a percentage of revenue — what’s left after the direct cost of producing the product.
Operating margin: Operating profit as a percentage of revenue — after production plus running costs, before interest and tax.
Net margin: Net profit as a percentage of revenue — what remains after every expense, including interest and tax.
Dividend yield: Annual dividend per share as a percentage of the current share price.
Market capitalisation: Total market value of the company: share price multiplied by shares outstanding.

Financial health

Cash generation and balance-sheet strength, taken from filings rather than from the share price.

Free cash flow: Free cash flow: cash generated by operations minus capital expenditure — the cash left over after paying to maintain and grow the asset base.
Operating cash flow: Cash actually generated by the core business over the quarter, before investment spending.
Capital expenditure: Capital expenditure: cash spent on property, equipment and other long-lived assets.
Net cash: Cash and equivalents minus long-term debt. A positive figure means more cash on hand than long-term borrowings.
Debt to equity: Total liabilities divided by shareholders’ equity — a gauge of how much the business is funded by debt versus owners’ capital.
Share buybacks: Cash spent repurchasing the company’s own shares during the quarter, which reduces the share count.
Research and development: Spending on research and development during the quarter.
Altman Z-Score: A 1968 formula that combines five balance-sheet and earnings ratios into one number measuring how close a company is to financial distress. Above 2.99 is the “safe” zone, below 1.81 the “distress” zone, and the stretch between the two is genuinely ambiguous. Read it as a snapshot of fragility, not a forecast of the share price. One caveat worth knowing: one of the five terms is market value divided by total liabilities, so a richly valued company scores high partly because investors are paying a lot for it — the breakdown on this page shows how much of the score that term accounts for.
Piotroski F-Score: A 2000 checklist of nine yes/no tests on profitability, debt and operating efficiency, one point each. Almost every test asks the same thing — is this better than a year ago? — so the score measures direction of travel rather than absolute quality. Eight or nine points means the fundamentals are improving on nearly every front; two or three means they are slipping on most. A company can score highly while still being small, unprofitable in absolute terms, or expensive, which is why it is shown next to the Altman Z rather than on its own.
Cash conversion cycle: How many days pass between paying for inventory and collecting the cash from selling it: days customers take to pay, plus days stock sits, minus days the company takes to pay its own suppliers. Shorter means less cash locked up in simply running the business. Below zero means suppliers are funding operations — the company is paid before it has to pay, which is a genuine structural advantage and rare outside retail and a handful of large technology firms. The direction matters more than the level, because what counts as normal varies enormously by industry: a supermarket and an aircraft maker are not comparable. A cycle stretching out is an early sign that cash is being absorbed even while reported profit looks steady.
Interest coverage: Operating profit divided by interest expense: how many times over the company earns its interest bill. Above roughly 3x is comfortable, under 1.5x means most of the operating profit is going to lenders, and below 1x the company is not earning enough to cover interest at all. Shown blank when a company reports no separate interest expense, which usually means it has little or no debt.

Earnings and dividends

How reported results compared with expectations, and how reliably a company has paid its shareholders.

Earnings surprise: Reported earnings per share versus the average analyst estimate beforehand. Above the estimate is a "beat", below is a "miss".
Dividend growth streak: Consecutive complete calendar years in which the total paid per share rose. The current, partial year is excluded so an incomplete year can’t look like a cut.
Consecutive payments: Payments in a row with no skipped period, counting back from the most recent.
Trailing annual dividend: The sum of the last four dividend payments — an approximate current annual rate.

Outlook signals

Forward-leaning readings calculated from filed figures. These are arithmetic on reported data, not predictions of the share price.

Growth trend: Whether year-over-year revenue growth is itself speeding up or slowing down, comparing the last four quarters’ average growth with the four before that.
Margin trend: Whether net margin has expanded or compressed versus a year earlier, measured in percentage points.
Backlog (remaining performance obligation): Remaining Performance Obligation: revenue already under contract but not yet recognised — a genuinely forward-looking figure companies file each quarter. Mostly reported by subscription and enterprise businesses; many hardware-style companies don’t report it at all.
Operating leverage: Revenue growth minus operating-cost growth. Positive means revenue is growing faster than costs, which tends to widen margins.
Billings: Revenue plus the change in deferred revenue — an estimate of what the company actually invoiced this quarter, rather than what accounting rules let it recognise. Cash collected up front lands in deferred revenue first, so billings often turn one to two quarters before reported revenue does.
Earnings quality (accrual ratio): Reported profit minus operating cash flow, as a share of total assets. Large positive values mean earnings are not backed by cash coming in the door — one of the most consistently documented warning signs of weaker earnings ahead. Negative is healthy: cash exceeds reported profit.
Share count: Diluted share count versus a year ago. A shrinking count (usually from buybacks) lifts per-share figures; a rising count dilutes them.
Dilution overhang: How far the diluted share count sits above the basic count. The gap is equity already promised — unvested stock awards, options and convertible notes — that becomes real shares as it vests or converts. A few percent is normal; a wide or widening gap means today’s per-share figures flatter what shareholders will actually own. One quirk to know: in a loss-making quarter accounting rules exclude those securities, so diluted equals basic and the gap reads as zero. It reappears when the company turns profitable — that jump is the rules changing, not a sudden wave of new shares. Fiscal fourth quarters are absent because share counts are period averages, which can’t be backed out of an annual figure the way revenue can.
Stock-based compensation: Stock-based compensation over the last four quarters, as a share of revenue. It is a real cost paid in equity rather than cash, and it is what keeps issuing new shares. Comparing it with buyback spending shows whether repurchases are genuinely returning capital or only cancelling out the shares being handed to employees.

Projections

How the revenue and earnings outlook is produced, and how its accuracy is measured.

Projection method: Each quarter is projected from the same quarter a year earlier, scaled by the median year-over-year growth of the last four quarters. Projecting from the matching quarter handles seasonality; the median limits the effect of one unusual quarter.
Implied EPS: Projected revenue multiplied by the recent net margin, divided by a projected share count. It stacks two more assumptions — flat margins and steady share-count drift — on top of the revenue projection, so treat it as more uncertain than the revenue figure it comes from.
Backtested error: The same projection method re-run on data ending four quarters ago, scored against what actually happened. Lower is better — it shows how far off this model has historically been.

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