What are the data sources?
The internet. I use Google and Yahoo Finance as data sources for the stock price series data and other fundamental data, as well as a few other public sites. Full disclosure: if their information is not accurate, then neither is mine.
What is PE?
It is the price to earnings ratio. Take the price of the stock and divide by the earnings per share. It gives you a sense of how ‘expensive’ a stock is. I use trailing earnings. Meaning, when calculating EPS is use what the company was known to have earned, not what analysts think it will earn in the near future.
What is PS or Price/Sales or Price to Sales Ratio?
Similar to the PE above, you divide the price of a share of stock by the amount of sales per share of stock.
What is volatility?
I use historical volatility over the past 50 days (annualized), consistent with the Black Scholes option pricing model. Explaining this would take a long time, so I’m simply going to use a link. Generally, volatilities of .1 – .25 are low, .25 – .4 are a bit high and anything above that is very volatile. In general, it is a measure of how much the stock jumps around each day and, under the assumption of the models (random walk with drift), how much it could move in a year. Thus, .2 means the stock price could reasonably be expected to be +/- 20% over the course of a year.
Why is some data missing?
Well, because it is missing from my data sources. Or, possibly, because it is not something I can calculate. For example, how do you calculate EPS growth from quarter to quarter if the company lost money. When something doesn’t make sense to calculate, I leave it as N/A.
Why are some blocks in the table green or red?
The colors are really to just help your eye find high and low values. Generally, the largest or ‘best’ value is green. The worst or riskiest is red. So, a if there are PE values of 13, 14 and 15, then the 13 would be green (because a low PE is ‘good’) and the 15 would be colored red. I only color one block in each table. When there are multiple values, such as (high,low,average), I use the average to rank them. Bottom line, don’t read too much into the colors. They just help guide your eyeballs through big datasets.
What does “QoQ” mean?
It means quarter-on-quarter, NOT quarter-over-quarter. This metric compares quarterly earnings ( or revenue ) from a given quarter to the quarter one year before to determine how much the earnings have grown. You do this because businesses are often seasonal, some seasons are always better than others. This gives you a better picture of how a company is growing its sales and earnings. It is the equivalent of comparing apples to apples. This is in contrast to quarter-over-quarter which indicates comparing one quarter to the previous one.
As an example, consider a retail store. They typically do well over the Christmas season. If you compared how much they made over the Christmas quarter to what they made over the fall quarter, it might give you a distorted picture of the company’s growth. It would be more logical to compare the Christmas quarterly earnings for this year to that of a year ago to get a better sense of how the company is growing. This type of comparison can be called a (Year-over-Year) comparison of quarterly results (YoY) or a quarter-on-quarter (QoQ) comparison. The term ‘Q/Q’ refers to quarter-over-quarter.
Why should I care about quarter on quarter (QoQ) growth?
Because growth affects stock prices and this is the best way to measure growth. Companies with declining growth ( and anticipated declining growth ) will not experience much stock price appreciation over the long term. However, when the growth trend improves, you will see the stock price appreciate.
What is the difference between ‘quarter-on-quarter’, ‘quarter-over-quarter’, ‘quarter on quarter’, and ‘quarter over quarter’?
Any term with the word ‘on’ refers to comparing quarterly results from one year to the next. Quarter on quarter is often abbreviated ( QoQ ).
Any term with the word ‘over’ refers to comparing sequential quarterly results. For example, comparing the fall quarter to the winter quarter. Quarter-over-quarter is abbreviated ( Q/Q ).
Just to confuse you more YoY means year-over-year and/or year-on-year and those terms are used interchangeably.
How do you calculate quarter on quarter (quarter-on-quarter) growth?
Here’s an example: Company A has earnings per share ( EPS ) of $10 for the March 2013 Quarter and had $9 EPS from the March 2012 quarter. To get the quarter on quarter percentage growth, simply do the following:
Percent QoQ Growth = (( $10 / $9 ) – 1 ) x 100;
For revenue, the calculation is identical, just replace the EPS with Revenue for the respective quarters.
Why are the EPS/Earnings data sometimes missing?
EPS growth requires two data points. If either is negative, then I don’t compute growth.
What does year over year (YoY) mean?
It means comparing results from one year to the previous year’s results. Thus, the following statement: “This is a YoY comparison of quarterly results,” is identical to the quarter-on-quarter results.
Why is EPS so volatile?
For many reasons. Companies can spend money to acquire another or they can take a charge, or they can play any number of accounting games. This makes any quarter to quarter EPS comparison a bit unreliable in-and-of itself. Therefore, consider all quarterly EPS in aggregate and look for trends. Also, it is best to look at Revenue growth and EPS growth in tandem.
Can a company have negative revenue?
Yes, it can. “How is this possible?”, you ask. The short answer is legal accounting shenanigans. It is a long discussion to explain how this can be or why it makes sense and I, frankly, don’t always understand it. It just illustrates how slippery accounting can be and why you should always chuckle when some CEO says that they follow standard, legal GAAP practices.