Glossary of Investment Terms

Par Value—the nominal or face value of a stock or bond.

Passenger Yield (Air Transport Industry)—the average revenue per mile paid by each passenger, computed by dividing passenger revenues by revenue passenger miles.

Payout Ratio—see Percent All Dividends to Net-Profit.

P/E Ratio—the price of the stock divided by earnings for a 12-month period. See Average Annual Price-Earnings (P/E) Ratio, Current Price-Earnings (P/E) Ratio, Trailing Price-Earnings (P/E) Ratio, and Median Price-Earnings (P/E) Ratio.

Peak Load (Electric Utility Industries)—the greatest demand for power during a specified period of time.

Pension Liability—the total of all unfunded, vested pension benefits that have been accrued.

Percent All Dividends to Net Profit—the sum of all cash dividends (common and preferred) declared, but not necessarily yet paid, for a company's operating or fiscal year, divided by net profit for that year, expressed as a percentage. Also known as the payout ratio.

Percent Commissions (Securities Brokerage Industry)—income received for execution of trades in commodities, listed securities, NASDAQ transactions, and sales for mutual fund shares as a percentage of total revenues.

Percent Common Stocks (Investment Companies)—the value of common stocks held as a percentage of total assets at year end.

Percent Earned Common Equity—net profit less preferred dividends divided by common equity (i.e., net worth less preferred equity at liquidation or redemption value), expressed as a percentage. See Percent Earned Total Capital.

Percent Earned Shareholders' Equity—net profit divided by net worth, expressed as a percentage. See Percent Earned Total Capital.

Percent Earned Net Worth (REIT Industry)—net profit divided by average net worth for the year, expressed as a percentage.

Percent Earned Total Assets (Bank and Thrift Industries)—net profit divided by total reported assets, expressed as a percentage.

Percent Earned Total Capital—net profit plus one half the interest charges on long-term debt divided by total capital (i.e., long-term debt plus net worth), expressed as a percentage.

Percent Earned Total Capital (REIT Industry)—net profit plus total interest expense (i.e., the sum of short- and long-term interest outlays) divided by the average total capital (i.e., average total debt plus average net worth), expressed as a percentage. Should be compared to Percent Earned Net Worth to determine the impact of leverage (i.e., use of borrowed capital) to enhance the return to stockholders.

Percent Expense to Premiums Written (Insurance/Property/Casualty/ Industry)—underwriting expense (commissions and general and administrative costs) divided by net premiums written less dividends to policyholders, expressed as a percentage. Also called the Expense Ratio.

Percent General & Administrative Expense to Gross Income (Thrift Industry)—expenses such as salaries, rents, and advertising and public relations costs divided by gross income for the year, expressed as a percentage.

Percent Interest Cost to Gross Income (Thrift Industry)—interest expenses for the year divided by gross income for the year expressed as a percentage.

Percent Interest Income (Securities Brokerage)—interest derived from funds loaned to customers' margin accounts plus interest on government and corporate securities held in the company's account, expressed as a percentage of total revenues.

Percent Investment Banking (Securities Brokerage Industry)—fees received for private placements, venture capital financing, real estate activity, mergers and acquisition, exchange and tender offers, consulting, underwriting, and syndication participation, expressed as a percentage of total revenues.

Percent Investment Income to Total Investments (Insurance/Property/Casualty/ Industry)—investment income less associated expense divide by total investments, expressed as a percentage.

Percent Losses to Premiums Earned (Insurance/Property/Casualty/ Industry)—losses and loss expenses divided by premiums earned, expressed as a percentage. Also called the Loss Ratio.

Percent Price to Book Value (Insurance Industries)—the average price for the year divided by book value per share, expressed as a percentage.

Percent Principal Transactions (Securities Brokerage Industry)—trading and securities transactions for the firm's own account (e.g., block positioning, market making, and government, municipal, and corporate bond trading out of the company's inventory), expressed as a percentage of total revenues.

Percent Problem Assets to Mortgage Loans —total assets at year end that are problems.

Percent Short-Term Debt to Total Debt (Financial Services Industry)—all debt due in the next 12 months divided by total short-and long-term debt at year end, expressed as a percentage.

Performance Rank While only the 1,700 stocks followed in the Value Line Investment Survey (print edition) are given Timeliness Ranks (TM), the Performance Rank is a similar calculation designed to predict the future relative price performance of the more than 3,300 stocks followed in Value Line's overall database but not included in the Value Line Investment Survey print edition. The Performance Rank is a purely quantitative measure that is based on past earnings and price performance data. Sample page

Per Share Basis—total Sales, "Cash Flow," Earnings, or Dividends, and other data divided by the number of shares outstanding. Earnings and dividends are almost always described on a per share basis for ease of understanding.

Personal Consumption Expenditures—consumer spending reported monthly by the Commerce Department. Also included in the Gross Domestic Product (GDP) reports.

Personal Income—consumer income reported monthly by the Commerce Department. Also included in the Gross Domestic Product (GDP) reports.

Plant Age—an estimate derived by dividing accumulated depreciation at the most recent year end by the depreciation allowance in the most recent year.

Plowback Ratio—see Retained to Common Equity.

Policyholders' Dividends (Life Insurance Industries)—refunds to the policyholder of part of the premium paid on participation life insurance policies, reflecting the difference between the premium charged and actual mortality experience.

Policyholders' Surplus (Life Insurance Industries)—book value as determined using statutory accounting techniques. Statutory accounting, unlike generally accepted accounting principles (GAAP), does not permit deferral of policy acquisition costs.

Preference Stock—see Preferred Stock.

Preferred Stock—a security that represents an ownership interest in a corporation and gives its owner a prior claim over common stockholders with regard to dividend payments and any distribution of assets should the firm be liquidated. Preferred stock normally is entitled to dividend payments at a specified rate. These dividends must be paid in full before the payment of a common stock dividend. May or may not have seniority over preference stock (which is akin to preferred stock), depending on state regulations.

Preferred Stock Ratio—preferred stock at liquidation or redemption value divided by total capital (i.e., the sum of long-term debt, preferred equity, and common equity), expressed as a percentage.

Premium Income Per Share (Insurance Industries)—income to the insurance company consisting of payments made by life, accident and health, disability, and property/casualty insurance policyholders as provided for under the terms of their insurance contracts, divided by the number of common shares outstanding.

Premium Over Book (REIT Industry)—the percentage by which the average annual stock price exceeds the average annual book value per share. If the stock sells at a discount from book value, the percentage of that year is preceded by a minus sign.

Premium Over Net Asset Value (Investment Companies)—see Discount From or Premium Over Net Asset Value.

Premium Written to Surplus (Insurance [Property/Casualty] Industry)—the total premium received for policies sold during the year divided by legally defined net worth.

Premiums Earned (Insurance Industry)—premiums received in advance for insurance protection that will remain in force for a year or more. Premiums accrue to revenues (i.e., are earned) only in proportion to the actual time elapsed under the policy relative to the entire policy term.

Premiums Written Per Share (Insurance [Property/Casualty] Industry)—the total premiums received from property/casualty insurance policyholders for policies sold during the year divided by the number of common shares outstanding.

Present Value—the amount that, if paid today, would be the equivalent of a future payment, or series of future payments, under specified investment assumptions. If, for example, funds can be invested today to yield 10% annually, a payment of $100 to be made in one year has a present value of $90.91; that is, $100 divided by 1.10.

Pretax Corporate Profits—see Corporate Profits.

Pretax Margin—profits before federal, state, and foreign income taxes as a percentage of sales or revenues.

Price Chart—a graphic historical presentation of the movement of a stock and, often, additional information. The price chart that appears on each Value Line page includes monthly stock price ranges (small vertical lines), a cash flow line (a solid line with projections shown as dashes), and a relative-strength price line (a series of dots).

Price Earnings Ratio—Probably the most widely used measure of stock valuation. Value Line shows a variety of P/E ratios on every company page, as discussed below:

The P/E ratio on the very top of the Value Line page (item 6 on page 21). This is calculated by dividing the recent price of the stock by the total of the last six months earnings and the next six months of estimated earnings.

The Relative P/E ratio. This compares the P/E of one stock with the median of estimated P/E ratios of all stocks under Value Line review. A relative P/E of more than 1 indicates that a stock's P/E ratio is currently higher than that of the Value Line universe; a P/E of less than 1 indicates that this stock's P/E is less than the Value Line average.

A Trailing P/E ratio. This is calculated by dividing the recent price of the stock by the past 12 months of actual (reported) earnings. This is the figure shown in most newspapers.

A Median P/E ratio. This is the average annual P/ E ratio of a stock over the past 10 years, with certain statistical adjustments made for unusually low or high ratios.

The Average Annual P/E ratio. This is calculated by dividing the average price for a year with the actual reported earnings for that year and is shown in the Statistical Array.

The Average Relative Annual P/E ratio. This is calculated by dividing the average annual P/E of a stock with the average annual P/E of all stocks under Value Line review.

Price Growth Persistence—a measurement of the historic tendency of a stock to show persistent price growth compared to the average stock. Value Line Persistence ratings range from 100 (highest) to 5 (lowest).

Price-Weighted Average—a stock price average that gives proportionately more weight to stocks with high share prices than it does to stocks with low prices. The Dow Jones Averages are price-weighted.

Primary Earnings Per Share—earnings per share calculated on the assumption of the conversion of certain senior securities (those of the company deemed, according to an accounting formula, to be common-stock equivalents—that is, likely to trade like common shares) into common stock. This calculation has not been used since 1997.

Prime Rate—the base lending rate reported by the largest commercial banks in the nation.

Problem Assets (Thrift Industry)—delinquent loans, loans past due 90 days or more, and foreclosed real estate.

Producer Price Index (PPI)—Labor Department price indexes of goods categorized by industry and by stage of processing. Widely watched among them are the raw materials, intermediate goods, and finished goods indexes. A measure of inflation.

Projections Box—a box appearing in the upper left corner of a Value Line stock page. It includes the absolute price gain expected for the next 3 to 5 years as well as the compound annual return (appreciation plus dividends) during the same period.

Proved Reserves (Petroleum and Natural Gas/Diversified/Industries)—quantities of natural resources that engineering estimates indicate with reasonable certainty are economically recoverable using present technology.