Glossary Of Terms

Asset Growth:

A measure of the growth of total assets over the past 60 months. When Asset Growth is greater than 50 percent, it is set to 50 percent. When Asset Growth is less than –50 percent, it is set to –50 percent.

Asset Utilization:

Previous year’s sales divided by total assets.

Aggressive Stocks:

DeMarche uses 11 factors to rate a stock as aggressive or defensive. Though categorizing a stock as aggressive is not based only on cap size, smaller stocks tend to be more aggressive than large cap stocks. An aggressive stock may include a small company with high market risk, wide trading ranges, low dividend yields and payout ratios, and thin profit margins.

Benchmarking:

Benchmarking means comparing one's self to other companies/stocks. Markets change and companies change, so peers and clones today may not be the same in a few years. >> Learn more

Defensive Stocks:

Defensive stocks tend to be large companies that have low market risk and narrow trading ranges. These stocks also tend to be companies with high dividends and payout ratios.

DeMarche Factor Model:

The DeMarche Factor Model has identified more than 56 factors, including industry, that when combined have significant explanatory or predictive power. This model was developed in 1994 by constructing a database covering more than 20 years of monthly information. Using cross-sectional and historical regressions, it tests hundreds of factors of various types on the 300 most liquid U.S. stocks.

A set of weighted factors indicates the relative growth or value orientation of a company. A different set of weighted factors is used to determine relative aggressiveness or defensiveness. Every stock in the DeMarche Universe of the 3000 most liquid companies is divided into groups based on the total of the value of the weighted factors.

Economic Return:

Previous year’s tax adjusted interest expense plus previous year’s earnings divided by total invested debt and equity capital. The weighted average cost of debt and equity capital is then subtracted from this percentage.

Expected Return:

The expected return of a stock is a function of its sensitivities to changes in the underlying factors encompassed within the DeMarche Factor Model.

Growth Stocks:

DeMarche uses nine factors to rate a stock as a growth or value security. Companies expected to have above-average rates of growth in earnings are classified as growth stocks. These will have either consistent growth patterns or will be expected to generate a significant improvement in the near-term earnings (earnings momentum). Such valuation statistics as price-to-earnings and price-to-book ratios are frequently above market averages. However, dividend yield typically is below market averages. These securities' risk characteristics (volatility and beta) vary, but are frequently above market averages.

Key Financial Characteristics:

Select factors within the DeMarche Factor model that focus on metrics under the control of company management, and where change of key factors and the direction of change can have significant impact on stock price. The factors used were selected from our work on migration, which is a body of research accomplished over several years that sheds light on the linkage between a stock's performance and the firm's financial quality.

Previous 12-month EPS Growth:

The difference between the previous year’s EPS and the EPS of the year prior divided by the average of the absolute values of the two EPS measures in the numerator.

Price Momentum:

Price momentum is defined as a stock’s return over the past three months relative to the overall market’s return.

Profit Margin:

Previous year’s net income divided by previous year’s sales (expressed as a percent). When Profit Margin is greater than 50 percent, then it is set to 50 percent. When Profit Margin is less than –50 percent, then it is set to –50 percent.

Proprietary Factor Model:

A factor model is a set of assumptions, databases and computer programs that forecasts future returns of stocks that are actively traded relative to the market as a whole. What makes a factor model proprietary is its unique combination of factors, assumptions and methodologies deployed to generate the forecasts of future relative stock returns.>>Learn more

ROA (Return on Assets):

Previous year’s net income divided by total assets (expressed as a percent). When ROA is greater than 50 percent, it is set to 50 percent. When ROA is less than –50 percent, it is set to –50 percent.

ROE (Return on Equity):

Previous year’s net income divided by common equity (expressed as a percent). When ROE is greater than 75 percent, it is set to 75 percent. When ROE is less than –75 percent, it is set to –75 percent.

Value Stocks:

DeMarche uses nine factors to rate a stock as growth or value. Value companies in the DeMarche system are those securities considered "cheap" as measured by such different valuation techniques as dividend discount rate models , price-to-earnings, price-to-book value, price-to-sales, or price-to-cash flow ratios. Value securities generally have P/Es and betas lower than the market, and yields greater than the market.