Value Line Page Explanation
Prepared by LadyJane Hickey for Communications Inquiry 101D
1. Value Line Ranks & Beta.
a. Timeliness: [Quoted from Value Line Glossary]: “Timeliness™ —the
rank of a stock's probable relative market performance in the year ahead. It is
derived via a computer program using as input the long-term price and
earnings history, recent price and earnings momentum, and earnings surprise.
All data are known and actual. Stocks ranked 1 (Highest) and 2 (Above
Average) are likely to outpace the year-ahead market. Those ranked 4 (Below
Average) and 5 (Lowest) are expected to underperform most stocks over the
next 12 months. Stocks ranked 3 (Average) will probably advance or decline
with the market in the year ahead. Investors should try to limit purchases to
stocks ranked 1 (Highest) and 2 (Above Average) for Timeliness.”
Timely Industries—see Industry Timeliness. “
b. Industry: [Quoted from Value Line Glossary]:
“Industry Timeliness Rank—the relative Timeliness rank of an industry,
updated weekly in the Summary & Index and calculated by averaging the
Timeliness ranks of each of the stocks assigned a Timeliness rank in the
industry. Industries with high Timeliness ranks are those with large
percentages of stocks that also have high Timeliness ranks. The rank of each
industry is listed on the front cover of Summary & Index, next to the name of
the industry.”
c. Safety: [Quoted from Value Line Glossary]:
“Safety Rank—a measurement of potential risk associated with individual
common stocks. The Safety Rank is computed by averaging two other Value
Line indexes—the Price Stability Index and the Financial strength Rating.
Safety Ranks range from 1 (Highest) to 5 (Lowest). Conservative investors
should try to limit their purchases to equities ranked 1 (Highest) and 2
(Above Average) for Safety.”
d. Beta: [Quoted from Value Line Glossary]:
“Beta—a relative measure of the historical sensitivity of the stock's price
to overall fluctuations in the New York Stock Exchange Composite Index.
A Beta of 1.50 indicates a stock tends to rise (or fall) 50% more than the
New York Stock Exchange Composite Index. The ''Beta coefficient'' is
derived from a regression analysis of the relationship between weekly
percentage changes in the price of a stock and weekly percentage changes
in the NYSE Index over a period of five years. In the case of shorter price
histories, a smaller time period is used, but two years is the minimum. The
Betas are adjusted for their long-term tendency to converge toward 1.00.”
1
Beta measures volatility of the stock and is a measure calculated by
Value Line for their investors.
2. Analyst’s Commentary: [Quoted from Value Line Glossary] “Analyst's
Commentary—an approximate 350-word report on each company page in
Ratings & Reports on recent developments and prospects-issued every three
months on a preset schedule.” Many investors think this is a very important
section, where the analyst explains why the forecast is whatever it is. This is
especially useful when a change in a trend is imminent, thus giving his/her
insight to the reader.
3. Financial Estimates: [Quoted from Exploring the Value Line Page]
“The estimates of sales, earnings, net profit margins, income tax rates, and so forth
are all derived from spread sheets maintained on every company and printed in bold
italics. The numbers are based on an analyst's latest thinking about where a company
may be in the future. Our analysts regularly review their projections with the
company's management. Afterwards, they make whatever adjustments they believe
are warranted.”
4. Historical Financial Data: [Quoted from Exploring the Value Line Page]
“Many investors like to use the Statistical Array to do their own analysis.
They, in particular, use the historical data in the center of each report to see how a
company has been doing over a long time. It 's worth pointing out that while all of
the data are important, different readers find different data items to be most
useful. The numbers are probably most helpful in identifying trends. For
example, look at sales per share to see if they have been rising for an extended
period of time. Look at operating margins and net profit margins to see if they
have been expanding, narrowing or staying flat. Also check the percentages near
the bottom to see if the Return on Total Capital or the Return on Shareholders'
Equity have been rising, falling or remaining about the same.
Annual Rates of Change: [Quoted from Value Line Glossary] “Annual Rates of
Change (Per Share)—compound yearly rates of change of per-share sales, cash flow,
earnings, dividends, and book value, or other industry-specific, per-share figures,
over the past 10 years and five years and estimated for the coming three to five
years.” Investors will check to see if growth has been increasing or slowing and
to see if Value Line’s analysis (provided in the third column labeled estimates)
thinks it will grow or decline in the future.
5.
6. Target price Range : [Quoted from Exploring the Value Line Page]
“This is the range in which the price is likely to fall during the period 3 to 5 years
hence. The range is based on the analyst's projections in the period 3-5 years out for
earnings multiplied by the estimated price/earnings ratio in the Statistical Array for
the same period. The width of the high-low range depends on the stock's Safety rank.
2
A stock with a high Safety rank has a narrower range, one with a low rank, a wider
one.”
7. 3-to 5-year Projections: [Quoted from Value Line Glossary entry]: “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.”
Investors whose primary goal is long-term price appreciation choose stocks
with above-average appreciation potential.
8. Price/Earnings Ratios: [Quoted from Value Line Glossary entry]: “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 … 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.”
Investors will usually compare the P/E of one stock with that of another
before making a buy/sell decision.
3