Glossary

Money a company owes to its suppliers or vendors for goods and services purchased on credit. A well-managed company stretches this out as long as possible without damaging relationships, effectively using suppliers as free short-term financing.

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for. If this grows much faster than revenue, it might mean the company is struggling to collect cash from clients.

A prolonged drop in stock prices, typically 20% or more from a recent peak. Usually accompanied by economic pessimism, rising unemployment, and shrinking corporate earnings. Since 1928, the S&P 500 has gone through about 26 bear markets with an average decline of 36% lasting roughly 9.6 months. While terrifying in the moment, every single bear market in S&P 500 history was eventually followed by new all-time highs. Historically, the best buying opportunities for patient investors.

A sustained period of rising stock prices, generally 20% or more from a recent low, with economic optimism, strong earnings, and investor confidence. Bull markets last significantly longer than bear markets. The average since 1928 ran about 2.7 years with a 114% gain. The longest in U.S. history stretched from March 2009 to February 2020, nearly 11 years. The bull attacks by thrusting its horns upward, symbolizing upward momentum. BullValue's name comes directly from this.

The constant annual growth rate that would take an investment from point A to point B over a given period. If revenue went from $100M to $200M in 5 years, the CAGR is about 14.9%. It smooths out volatile year-to-year swings and gives you the "true speed" of growth. Essential for comparing companies with different starting points and timeframes.

Money spent on acquiring, maintaining, or upgrading long-term physical assets: factories, equipment, servers, real estate. Capex is subtracted from operating cash flow to get free cash flow. Software companies need minimal capex relative to revenue and generate abundant FCF. Capital-heavy industries like oil, airlines, and telecoms must reinvest constantly just to keep running. Understanding capex intensity is key to assessing true cash generation.

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. High CapEx businesses often struggle to generate Free Cash Flow because they constantly need to reinvest to survive.

The most liquid assets on the balance sheet, including physical cash and assets that can be converted into cash immediately, like short-term government bonds. It is the company's ultimate safety net and war chest for acquisitions or buybacks.

The direct costs attributable to the production of the goods or services sold by a company. For a manufacturer, this includes raw materials and factory labor. For a software company, it includes server costs. Subtracting this from revenue gives you Gross Profit.

Measures whether a company can pay its short-term bills with its short-term assets over the next 12 months. Calculated as current assets divided by current liabilities. Above 1.0 means more short-term assets than short-term debts, a healthy sign. Below 1.0 can signal liquidity problems. Very high ratios (above 3.0) can suggest inefficient use of cash. Most healthy companies sit between 1.2 and 2.0.

A valuation method that estimates how much a company is worth today based on the cash it will generate in the future. Each future euro is "discounted" back to the present because a euro today can be invested. You project free cash flows for 5 to 10 years, discount them using the WACC, and add a terminal value. The result is the intrinsic value per share. If the stock trades below that number, you may have found a bargain with a good margin of safety.

Shows the proportion of a company's assets financed by debt versus shareholders' equity. Calculated as total debt divided by shareholders' equity. A D/E of 1.0 means equal amounts of debt and equity. Above 1.0 means more debt than equity. Leverage amplifies everything: in good years, borrowed money boosts shareholder returns; in bad years, fixed interest payments can crush a company. Utilities and banks carry D/E ratios above 1.5 routinely. Tech companies often operate with little or no debt. Rising interest rates hit highly leveraged companies hardest.

An accounting method of allocating the cost of a tangible or intangible asset over its useful life. It is a non-cash expense. For example, if a factory costs $10M and lasts 10 years, the company records a $1M expense each year, even though the cash was already spent.

The portion of a company's profit allocated to each outstanding share of common stock, assuming all convertible securities are exercised. It shows how much profit is theoretically tied to one single share. If Net Income goes up but the company issues millions of new shares, EPS might actually drop.

The total dividends paid out over an entire year divided by the number of outstanding ordinary shares. It tells an investor exactly how much cash they will receive for each share they own.

The annual dividend expressed as a percentage of the stock price. A share at €100 paying €5 per year has a yield of 5%. A high yield can attract income investors but can also be a trap: if the price crashed 50% and the dividend hasn't been cut yet, the yield looks artificially high. Always check the payout ratio and FCF coverage before trusting a high yield. The most reliable payers sit between 2-4% with decades of consecutive increases.

The actual cash distributed to shareholders out of the company's profits or reserves. Unlike stock buybacks which increase your ownership percentage invisibly, dividends put cold hard cash directly into your brokerage account.

A measure of a company's core operating profitability, ignoring non-cash expenses, taxes, and capital structure. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Strips out financing decisions and tax jurisdictions to isolate core performance. Useful for comparing companies across countries and capital structures. But it ignores capital expenditures entirely, which can be massive. Warren Buffett once asked: "Does management think the tooth fairy pays for capital expenditures?"

A term popularized by Warren Buffett for the durable competitive advantages that protect a company's profits from competitors. The five classic types: (1) Brand power (Apple, Coca-Cola), (2) Network effects (Visa, Meta), (3) Cost advantages (Costco, Ryanair), (4) Switching costs (Microsoft Office, SAP), and (5) Intangible assets like patents and licenses. A wide moat lets a company sustain high ROIC for decades, the single most important factor in long-term wealth creation.

The theoretical price of buying the entire business. Equals market cap plus total debt, minus cash. The logic: if you buy a company, you inherit its debts (you must repay them) and its cash (which offsets the cost). EV gives a much more accurate picture of true value than market cap alone, especially when comparing companies with very different debt levels. A company with a $10B market cap, $5B in debt, and $1B in cash has an EV of $14B.

Total net profit divided by the number of shares outstanding. It is the building block behind many valuation metrics, including P/E. There are two versions: basic (actual share count) and diluted (assumes all stock options and convertible securities are exercised). Always use diluted EPS for a conservative analysis.

Shows how many years it would take for a company's operating cash to pay back its entire purchase price, including debt. Calculated as Enterprise Value divided by EBITDA. Better than P/E for comparing companies with different debt levels and tax situations because EV includes debt and EBITDA excludes interest and taxes. An EV/EBITDA of 10x means a buyer would pay 10 years of operating cash flow to acquire the whole company, debt included. This is the metric investment banks and private equity firms use most in M&A deal pricing. Lower is generally cheaper.

The cash left over after a company pays its operating costs and capital expenditures. Unlike net income, which accountants can shape with depreciation schedules and one-off charges, FCF represents real money in the bank. It can go to dividends, buybacks, debt repayment, or acquisitions. A company that reports profits but burns cash every year has a serious problem. FCF is the oxygen of a business.

Shows the net flows of cash that are used to fund the company. Includes transactions involving debt, equity, and dividends. Issuing stock or taking on debt brings cash in (positive); buying back stock or paying off debt sends cash out (negative).

Assets that are not physical in nature. Intangibles include patents, trademarks, and copyrights. Goodwill arises when a company buys another company for a price higher than the fair market value of its net assets. It represents the value of brand reputation and customer loyalty.

The percentage of revenue left after subtracting the direct cost of producing goods or services (COGS). A 70% gross margin means the company keeps $0.70 of every $1 sold to cover operations, R&D, marketing, and profit. Software companies typically hit 75-90% (the marginal cost of another user is near zero). Retailers operate at 25-40%. If the gross margin is low or falling, no amount of cost-cutting further down the line will save the business.

The profit a company makes after deducting the costs associated with making and selling its products. It reveals the fundamental markup a company commands on its products. If gross profit is shrinking, the company might be losing pricing power.

The raw materials, work-in-progress, and finished goods that are ready or will be ready for sale. A massive buildup in inventory can be a red flag that products aren't selling and might soon become obsolete or require steep discounts.

Cash generated or spent on long-term assets and investments. This includes buying/selling property, equipment (CapEx), or acquiring other companies. This section is usually negative for growing companies as they invest heavily in their future.

Loans and financial obligations lasting over one year. While cheap debt can amplify shareholder returns, too much long-term debt makes a company fragile to interest rate shocks and economic downturns.

The gap between a stock's estimated intrinsic value and its current market price. If you calculate that a company is worth $100 per share and the stock trades at $65, your margin of safety is 35%. The concept was coined by Benjamin Graham and is the cornerstone of value investing. A wide margin protects against errors in your analysis, bad surprises, and market panics. Graham recommended buying only with a margin of 30-50%.

Represents the total market value of a company's outstanding shares of stock. Short for Market Capitalization, it is calculated by multiplying the current stock price by the total number of outstanding shares. It tells you how much it would cost to buy the entire company right now. Companies are generally divided into mega-cap ($200B+), large-cap ($10B-$200B), mid-cap ($2B-$10B), and small-cap ($300M-$2B).

Share price multiplied by the total number of shares outstanding. Categorizes companies by size: Mega-cap (>$200B), Large-cap ($10-200B), Mid-cap ($2-10B), Small-cap ($300M-2B), Micro-cap (<$300M). Bigger companies tend to be more stable but grow slower. Smaller ones offer more growth potential with more risk. Market cap is not the "price" of a company. For that, you need Enterprise Value, which adds debt and subtracts cash.

The sum of operating, investing, and financing cash flows. It shows exactly how much the company's bank account balance went up or down during the period. If this is consistently negative, the company is bleeding cash and will eventually need to raise capital.

What remains in the company's bank account after all operating expenses, interest, and taxes have been paid. Often called the "bottom line". While it is the most famous profit metric, it can be distorted by accounting rules and one-off items.

The percentage of every euro of revenue that becomes actual profit for shareholders after paying everything: production costs, operating expenses, interest on debt, and taxes. A 20% net margin means the company keeps $0.20 of pure profit from every $1 sold. Luxury and software often exceed 25%. Supermarkets and airlines scrape by at 1-3%. Comparing net margins across industries makes no sense. Comparing them within the same industry reveals who has superior pricing power and cost discipline.

The cash actually generated by a company's normal business operations. It strips out non-cash items (like depreciation) and changes in working capital. It is much harder to manipulate with accounting tricks than Net Income.

The costs required to run the day-to-day business that are not directly tied to the production of goods. This includes rent, administrative salaries, marketing, and R&D. Keeping operating expenses in check is crucial for converting gross profit into operating income.

The profit realized from a business's operations, after deducting operating expenses but before deducting interest and taxes. Also known as Operating Profit or EBIT. It tells you how much money the core business actually makes from its daily operations.

The percentage of revenue remaining after paying both COGS and all operating expenses (salaries, rent, R&D, marketing). Shows how efficiently the core business converts sales into operating profit, before interest and taxes. Expanding operating margins over time signal a well-managed company with pricing power. Example: if revenue grows 10% but operating costs grow only 5%, the margin expands and each new sale becomes more profitable than the last.

The recurring costs of running a business day to day: rent, salaries, utilities, marketing, R&D. Unlike Capex, Opex hits the income statement immediately in the period it occurs. Companies that grow revenue faster than their Opex have "operating leverage," meaning each additional euro of sales drops a bigger share to the bottom line. This is how margins expand over time.

The total number of shares held by all shareholders, including institutions, insiders, and the public. This number rises when the company issues new shares (dilution, bad for existing shareholders because earnings are spread thinner) and falls when it buys shares back (buybacks, generally positive because earnings concentrate in fewer shares). Tracking the share count over 5-10 years tells you whether management is creating or destroying shareholder value.

Compares market cap to book value (assets minus liabilities on the balance sheet). A P/B below 1.0 means the stock trades for less than the accounting value of its net assets, a classic value investing signal. But book value is based on historical cost and can massively understate the worth of intangible-heavy businesses like software or luxury brands. Most relevant for banks, insurers, and real estate companies where tangible assets dominate.

Shows how much investors are willing to pay for each dollar of the company's annual profit. Known as the Price-to-Earnings Ratio, it is the most popular valuation metric in the world. A P/E of 20 means you are paying $20 for every $1 the company earns in profit. A high P/E implies investors expect high future growth (or the stock is expensive). A low P/E implies low expectations (or the stock is a bargain). It is most useful when comparing similar companies in the same industry.

The most quoted valuation multiple in finance. Divides the share price by earnings per share. A P/E of 20 means investors pay $20 for every $1 of annual profit. A high P/E can reflect strong expected growth or overvaluation. A low P/E can signal a bargain or a company in decline. Context matters: compare P/E within the same industry and check whether earnings are at a cyclical peak or trough.

Market cap divided by free cash flow. Similar to P/E but uses actual cash generation instead of accounting earnings. Since FCF is much harder for management to manipulate than reported profits, many experienced investors prefer it. A company at 15x P/FCF generates enough real cash to "pay back" its entire market value in 15 years, assuming everything stays the same. Especially valuable for capital-intensive businesses where the gap between earnings and cash can be wide.

Market capitalization divided by total revenue. Works even when a company has no profits, which makes it the go-to metric for high-growth tech and biotech firms reinvesting aggressively. A P/S of 10 means investors pay $10 for every $1 of revenue. The catch: revenue says nothing about profitability. A company with $1B in sales and zero margin is very different from one with $1B in sales and 30% margins.

The share of earnings paid out as dividends, expressed as a percentage. A ratio of 40% means the company distributes 40% and retains 60% for reinvestment. Above 100% means it pays more than it earns, which is unsustainable and usually precedes a dividend cut. For most mature companies, a healthy range is 30-60%. REITs are an exception because they are legally required to distribute at least 90% of taxable income.

Long-term physical assets vital to business operations, such as factories, land, buildings, and heavy machinery. Capital intensive businesses (like airlines or steelmakers) have massive PP&E, requiring constant maintenance capital to keep running.

Money spent to innovate, create new products, or improve existing ones. While it reduces current profits, heavy R&D spending is often the seed for future growth in tech, pharma, and industrial sectors.

The accumulated portion of a company's net income that is not paid out as dividends, but rather retained for reinvestment into the core business or to pay down debt. It represents the historical wealth creation of the firm.

The total amount of money brought in by a company’s operations, before any expenses are deducted. Also known as the "top line", it is the raw fuel for any business. If revenue isn't growing over time, the company is either stagnating or shrinking.

Measures how efficiently a company uses its total assets to generate net profit. Calculated as net income divided by total assets. Unlike ROE, it cannot be inflated by debt because it uses the full asset base regardless of how those assets were financed. Particularly useful for banks and financial companies where leverage is part of the business model. A bank with a 1.5% ROA is considered very good. An industrial company needs much higher to justify its capital.

Measures how much net profit a company generates for each dollar invested by its shareholders. Calculated as net income divided by shareholders' equity. A ROE above 15-20% is generally good, but needs context: a company can inflate its ROE by loading up on debt, which shrinks the equity base. A 30% ROE backed by moderate debt is excellent. The same 30% fueled by dangerous leverage is a red flag. Always check it alongside the Debt-to-Equity ratio.

Measures how well a company turns its total invested capital (equity plus debt) into operating profits. Calculated as NOPAT divided by invested capital. When the ROIC stays above the WACC year after year, every euro reinvested creates value. This is the strongest quantitative signal of a durable competitive advantage or moat.

Selling, General, and Administrative expenses represent the overhead of running a business. This includes marketing, sales commissions, executive salaries, and office supplies. Warren Buffett famously avoids companies with excessively high SG&A relative to gross profit.

When a company buys its own shares from the open market and retires them. This reduces the total number of shares outstanding, effectively making every remaining share worth a larger slice of the company. It is a highly tax-efficient way to return capital to shareholders.

The total number of shares of a company currently owned by all its investors, including company insiders. If this number goes up (dilution), your slice of the company gets smaller. If it goes down (buybacks), your slice gets bigger without you doing anything.

Any financial obligations or loans that must be paid off within one year. High short-term debt during an economic crisis is extremely dangerous, as credit markets may freeze, making it impossible to refinance.

Paying employees with equity in the business instead of cash. While it saves the company cash in the short term, it dilutes existing shareholders. Many tech companies report huge Free Cash Flows only because they pay employees in shares rather than cash.

The net worth of a company. Calculated as Total Assets minus Total Liabilities. It represents the amount of money that would be returned to shareholders if all the assets were liquidated and all the company's debt was paid off.

Everything a company owns that has economic value, from cash in the bank to factories and patents. The fundamental accounting equation states that Total Assets must always equal Total Liabilities plus Shareholders' Equity.

All the assets of a company that are expected to be sold, consumed, or exhausted through standard business operations within one year. Used to calculate liquidity ratios to ensure the company can survive the next 12 months.

All of a company's short-term financial obligations that are due within one year or within a normal operating cycle. Compared against Current Assets to determine if a company is facing an imminent liquidity crisis.

The sum of all short-term and long-term interest-bearing liabilities. This represents the total amount of money borrowed by the company that must be paid back. Always compare it to the company's cash position to find the Net Debt.

Everything a company owes to outside parties, including all debt, accounts payable, deferred revenues, and pension obligations. If Total Liabilities exceed Total Assets, the company has negative equity.

The average rate a company pays to finance its business, combining the cost of debt and equity. It represents the minimum return a company needs to earn to satisfy both its shareholders and creditors. In a DCF analysis, the WACC is the discount rate: a higher WACC means future cash flows are worth less today, which lowers the fair value. Most mature companies have a WACC between 8% and 12%.