Quickly get down to business with the security banners at the top of each Company View page. Security banners are your quickest and easiest way to view the most important measures of an equity’s performance before you dig deeply into the full range of information accessible on each Company View page.
The first banner you see gives you an instant snapshot of a stock’s key measures like Value Line’s Timeliness™ and Safety™ Ranks, Financial Strength rating, and analyst projections. The banner also gives you a quick view of target price range, dividend yield, price/ earnings ratio, and beta.
At the far right of the Security Banner is a three-bar icon. Click on the bars for two additional Security Banners.
The second-level banner focuses your attention on Value Line estimates and projections for the company you are researching.
And the third level spotlights dividend and volatility information. Volatility consists of beta and alpha. Value Line calculates beta through a proprietary formula that measures a stock’s sensitivity to the market’s overall performance. Alpha is a measure of performance on a risk-adjusted basis. (See below.)
Projected Target Price Range
When your strategy is long-term growth, your goal is to buy stocks with potentially above-average price appreciation. Our analyst-derived three- to five-year Target Price Range is one of your most important tools for identifying these stocks.
Target Price Range is a forecast of where Value Line expects the average price of a stock to be in the next 3-to-5 years. The range is based on our analyst’s informed estimate of company earnings during this time frame, multiplied by the analyst’s estimated price/earnings ratio for the same period.
The difference between a stock’s potential high and low prices depends on the stock’s Safety™ Rank. Expect a stock with a high Safety Rank to be more stable, and therefore to have a narrower band. A stock with a low Safety Rank is likely to be more erratic, and therefore have a wider range.
Because the analyst calculates the Target Price Range using an estimate of future earnings, based on information available at the time it is calculated, this measure is very subjective. As company performance changes in the future, the Target Price Range will also be altered.
The price/earnings ratio (P/E Ratio or P/E) is the most widely used statistic in investing.
If you’re like most accomplished investors, you won’t make a move without knowing the P/E ratios of the companies whose stocks are on your short list. And you’ll regularly check the P/E ratios of the companies whose shares you own.
The P/E ratio is a measure of a company’s market value relative to its earnings. In the most basic terms, a P/E ratio is the price of a company’s stock at the close of the previous trading day, divided by its share earnings. Value Line calculates the P/E by dividing a stock’s current price by an earnings figure that includes six months of past earnings and six months of projected future earnings.
Let’s say a company’s share price is $40.00 and its earnings per share is $2.00. Its P/E ratio would be 20 ($40.00 divided by $2.00). If the company’s earnings jump to $2.50 and its price remains $40.00, then its P/E would lower to 16, a more attractive scenario in this case.
There is no "right" or "wrong" P/E. Expect to pay a higher price, and accept a higher P/E, for companies whose earnings are accelerating. The opposite is true for companies whose earnings are flat or growing slowly.
If you believe that earnings are poised to take off before the market recognizes it – and the company is maintaining its current P/E ratio – you might want to buy now in anticipation of a future earnings jump.
In fact, depending on your tolerance for risk, you might be willing to pay a relatively high price for a stock with low, or even no earnings, in anticipation that it will be a standout money maker in the future.
On the other hand, if our analyst projects continuing growth for a company, but its P/E is already high, you may want to wait for a pullback in price before committing funds so you don’t pay more than you want, based on the total return you anticipate.
You’ll also find a trailing P/E and a 10-year median P/E in our data.
The trailing P/E does not consider future earnings. It divides the stock’s previous trading day’s closing price by the most recent 12 months of actual earnings.
A dividend is a payment by a company to its shareholders. It is usually in cash, and usually paid quarterly.
Dividend yield measures a company’s expected return from dividends in the coming 12 months, expressed as a percent of its recent price.
Above-average dividend yields are especially important for conservative investors who are seeking income. A company’s attractive yield tends to support its stock when the market is declining. Plus, an above-average yield usually results in slightly lower-than-market risk (volatility) compared to the average stock in our coverage universe.
If you are primarily an income-oriented investor who is less concerned about a stock’s price appreciation potential than the reliability of its dividends, screen for stocks with higher-than-average yields. Then see if the dividend payment is trending higher over time. Steady increases are an attractive measure of potential future performance. Finally, check out the company’s Financial Strength rating. Financial Strength tells you whether the company will likely be able to continue to pay its dividend, and how likely the dividend will continue to increase. We suggest that conservative investors only consider buying shares in companies with Financial Strength ratings of at least B+
Beta is a relative measure of volatility -- the historical sensitivity of a stock’s price to fluctuations in the NYSE Composite Index over the past five years.
Your evaluation of a stock is not complete without considering beta. Value Line’s beta is based on a proprietary formula that uses regression analysis to determine the relationship between weekly percentage changes in the stock price, and weekly percentage changes in the NYSE Composite Index, over the past five years. In the case of shorter price histories, a shorter time period is used, but two years is the minimum.
The market beta is set at 1.00. If a stock’s beta is also 1.00, it has historically moved in lock step with the general market. For example, if the market rises or falls by 10%, a stock with a beta of 1.00 will probably increase or decrease by about 10%.
A beta above 1.00 indicates that a stock is more volatile than the market as a whole. For example, if a stock has a beta of 1.50, it has historically been 50% more volatile than the market. As a result, if the market increases or decreases by 10%, the stock will probably increase or decrease by about 15%.
The reverse is also true. If your stock has a beta of .70, it is less volatile than the overall market. In this case, if the market rose or declined by 10%, your stock will likely rise or fall by 7%.
It is important to note that betas vary across companies and industries, depending on various factors, including general economic performance, the cyclical nature of industries, and other factors. Utilities, for example, are usually low-beta companies.
If you are a conservative investor, you will likely favor stocks with low betas to limit volatility. Remember, however, that beta is a double-edged sword. Stocks with low betas won’t fall as much as the broader market in a market decline, but when the market rallies, they will likely be relative underperformers.