NOTIFICATION CENTRE
DEFINITIONS
What follows are some of the more common metrics that share market investors use to compare similar companies (peers) and their past performance. Each of the metrics used on our platform are forward looking and have been normalised, meaning they relate to forecast earnings and have been adjusted to remove one-off or non-recurring items.

Cash Conversion


The amount of money, in cash, that a company makes divided by the amount it reports to have made from an accounting perspective. Investors generally look for companies with higher cash conversion ratios as it suggests they are able to convert more of their reported earnings into cash through better debtor, creditor and inventory management than their peers.

DCF-value (discounted cashflow valuation)


The value of a company’s shares based on the amount of money, in cash, it is expected to make going forward.

Dividend Cover


The amount of money, in cash, that a company makes and is able to distribute as dividends, divided by the amount it does distribute as dividends. Investors generally look for companies with higher dividend coverage ratios that are also above 1.0x as it suggests they are able to produce sufficient cashflows to meet their dividend payments without the need to raise debt or sell assets.

Dividend Yield


A company’s post-tax dividends per share (DPS) divided by its share price. Investors generally look for companies with higher dividend yields than their peers, provided they also have dividend coverage ratios above 1.0x as it suggests they can keep paying dividends without increasing debt.

EPS growth


A company’s growth in earnings per share (EPS) over the next three years. Investors generally look for companies with higher underlying earnings growth than their peers, after accounting for any acquisitions or other corporate transactions.

EBITDA margin


A company’s earnings before interest, tax, depreciation and amortisation (EBITDA) divided by its revenues. Investors generally look for companies with higher EBITDA margins as it suggests they have lower costs or greater pricing power than their peers.

EV/EBITDA (enterprise value to EBITDA)


The total value of a company’s debt and equity, being its enterprise value (EV), divided by its earnings before interest, tax, depreciation and amortisation (EBITDA). Investors generally look for companies with lower EV/EBITDA ratios and higher earnings growth than their peers.

Favourable metrics


A fifteen-point measure of how a company compares to other, similar companies within the same sector. A higher number suggests its price, risk and earnings quality are better than its peers.

Interest cover


A company’s earnings before interest, tax, depreciation and amortisation (EBITDA) divided by its interest expense. Investors generally look for companies with higher interest coverage ratios as it suggests they are able to service their debt more easily than their peers.

Net debt to capital ratio


A company’s net debt divided by the book value of its debt plus equity. Investors generally look for companies with lower debt and higher interest coverage ratios than their peers.

P/B (price to book)


A company’s share price divided by the book value of its shareholders’ equity. Investors generally look for companies with lower P/B ratios and higher ROCE ratios than their peers.

P/E (price to earnings)


A company’s share price divided by its earnings per share (EPS). Investors generally look for companies with lower P/E ratios and higher earnings growth than their peers.

ROCE (return on capital employed)


A company’s earnings before interest and tax (EBIT) divided by its total assets less creditors. Investors generally look for companies with higher ROCE ratios that are also above WACC as it suggests they are able to produce better shareholder returns than their peers.

Share price


The current share price, delayed by up to 30 minutes.

TV/DCF (terminal value to DCF value)


The value of a company beyond what can be reasonably forecast, being its terminal value (TV), divided by its DCF value. Investors generally look for companies with lower TV/DCF ratios than their peers to minimise the risk that the terminal value is not realised.

Value-gap


The proportional difference between a company’s share price and its DCF value. Investors generally look for companies with positive value-gaps as it suggests they are undervalued by the market.

WACC (weighted average cost of capital)


An overall assessment of a company’s intrinsic risk, calculated using the 'Brennan Lally capital asset pricing model'. Investors generally look for companies with a lower WACC as it suggests they have fewer company-specific risks than their peers.

WC to revenue


A company’s working capital (WC) divided by its revenue. Investors generally look for companies with lower working capital ratios as it suggests they hold less surplus inventory and are able to manage their debtors and creditors better than their peers.