Investment Metrics Explained

Understand how we calculate peer comparison scores, badges, and what each metric means.

Peer Comparison: The Core Concept

We compare each company's financial metrics to others in its industry using the advanced industry classification. A company gets a "Good" badge when it's significantly better than the industry median (typically >10% difference).

How Badges Are Assigned

Each metric has a "goal direction" — some metrics are better when lower (like P/E ratio), while others are better when higher (like profit margin).

Company KPI

AI Process

Industry Peer
Comparison

Peer Badge

"Our algorithm identifies companies outperforming ≥90% of peers in their specific industry."

"Badges are dynamic and update daily based on latest price and report data."

Good

Significantly better than industry peers (>10% better)

Neutral

Within range of industry average (±10%)

Concern

Significantly worse than peers (may indicate risk)

Valuation Metrics

Valuation metrics help you understand if you're paying a fair price for a stock. Lower is generally better for these ratios.

P/E Ratio (Price-to-Earnings)
Lower is better

What it measures: How much you pay for each dollar of company profits.

Formula: Stock Price ÷ Earnings Per Share

Example: A P/E of 15 means you pay $15 for every $1 of annual profit.

✓ Good if: Lower than industry average⚠ Concern if: Much higher than peers

P/B Ratio (Price-to-Book)
Lower is better

What it measures: Stock price vs. the company's net assets (book value).

Formula: Stock Price ÷ Book Value Per Share

Example: A P/B of 0.8 means the stock trades below its accounting value.

✓ Good if: P/B < 1 may indicate undervaluation⚠ Note: Tech companies often have high P/B

P/S Ratio (Price-to-Sales)
Lower is better

What it measures: How much you pay per dollar of revenue.

Formula: Stock Price ÷ Revenue Per Share

Best for: Companies without profits yet (startups, growth companies).

✓ Good if: Lower than industry peersℹ Useful for unprofitable companies

Health Metrics

Health metrics assess balance sheet strength and the company's ability to meet obligations.

Debt-to-Equity Ratio
Lower is better

What it measures: How much debt the company uses relative to shareholder equity.

Formula: Total Debt ÷ Shareholder Equity

Interpretation: A ratio of 1.5 means $1.50 of debt for every $1 of equity.

✓ Good: Lower than industry average⚠ High debt increases financial risk

Current Ratio
Higher is better

What it measures: Can the company pay its short-term bills?

Formula: Current Assets ÷ Current Liabilities

Interpretation: A ratio of 2.0 means $2 of assets for every $1 of short-term debt.

✓ Good: Above 1.5 (comfortable buffer)⚠ Below 1.0 may indicate liquidity issues

Equity Ratio (Solidity)
Higher is better

What it measures: What portion of assets is funded by shareholders (not debt)?

Formula: Shareholder Equity ÷ Total Assets

Interpretation: An equity ratio of 40% means 40% of assets are equity-funded.

✓ Good: >30% for most industriesℹ Banks typically have lower ratios

Performance Metrics

Performance metrics measure profitability and efficiency. Higher is better for these.

Return on Equity (ROE)
Higher is better

What it measures: How efficiently does the company use shareholder money?

Formula: Net Income ÷ Shareholder Equity

Interpretation: ROE of 15% means $0.15 profit for every $1 of equity.

✓ Good: >15% is often considered strongℹ Compare within industry

Return on Assets (ROA)
Higher is better

What it measures: How efficiently does the company use all its assets?

Formula: Net Income ÷ Total Assets

Interpretation: ROA of 8% means $0.08 profit for every $1 of assets.

✓ Good: Varies widely by industryℹ Asset-light businesses have higher ROA

Profit Margin
Higher is better

What it measures: How much of each sale becomes profit?

Formula: Net Income ÷ Revenue

Interpretation: A margin of 10% means $0.10 profit per $1 of sales.

✓ Good: Higher than industry peersℹ Software typically >20%, retail often <5%

Growth Metrics

Growth metrics track how quickly a company is expanding.

Revenue Growth
Higher is better

What it measures: Year-over-year increase in company sales.

Formula: (Current Revenue - Previous Revenue) ÷ Previous Revenue

Interpretation: 20% growth means revenue is 20% higher than last year.

✓ Good: Consistent, above-peer growth⚠ Watch for low-quality growth (via acquisition)

Momentum Metrics

Momentum metrics measure recent price performance relative to the market.

1-Month Return

Short-term price momentum. Compare to market average to spot hot/cold stocks.

3-Month Return

Medium-term momentum. Smooths out short-term noise while staying current.

1-Year Return

Long-term trend. Shows whether the stock is in a sustained up/downtrend.

Hot vs Laggards: Stocks with momentum significantly above market average are labeled "Hot". Those significantly below are "Laggards". These labels are relative to all companies in our coverage, not just industry peers.

Technical Indicators

Technical indicators use price and volume patterns to identify potential trading signals. Unlike fundamental metrics, these use fixed thresholds rather than peer comparison.

RSI (Relative Strength Index)

Measures if a stock is overbought or oversold.

>70 = Overbought

30-70 = Neutral

<30 = Oversold

MACD Histogram

Compares short-term vs long-term momentum.

>0 = Bullish

<0 = Bearish

Price vs SMA (50 & 200)

Shows if price is above/below its moving average.

Above SMA = Uptrend

Below SMA = Downtrend

Relative Volume

Current volume vs average volume.

>1.0 = High interest

<1.0 = Low interest

Quick Reference: All Metrics

Category	Metric	Goal	Comparison
Valuation	P/E Ratio	Lower	Industry peers
Valuation	P/B Ratio	Lower	Industry peers
Valuation	P/S Ratio	Lower	Industry peers
Health	Debt/Equity	Lower	Industry peers
Health	Current Ratio	Higher	Industry peers
Health	Equity Ratio	Higher	Industry peers
Performance	ROE	Higher	Industry peers
Performance	ROA	Higher	Industry peers
Performance	Profit Margin	Higher	Industry peers
Growth	Revenue Growth	Higher	Industry peers
Momentum	RSI (14)	30-70	Fixed thresholds
Momentum	MACD	>0	Fixed thresholds

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