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"PlanB" said the next six months will “make or break'' the stock-to-flow model.
The ratio of a stock over a flow has units of (units)/(units/time) = time. For example, the debt to GDP ratio has units of years (as GDP is measured in, for example, dollars per year whereas debt is measured in dollars), which yields the interpretation of the debt to GDP ratio as "number of years to pay off all debt, assuming all GDP devoted to ...
In theory, the lower a stock's price/cash flow ratio is, the better value that stock is. For example, if the stock price for two companies is $25/share and one company has a cash flow of $5/share ( 25 ⁄ 5 =5) and the other company has a cash flow of $10/share ( 25 ⁄ 10 =2.5), then if all else is equal, the company with the higher cash flow ...
Stock B is trading at a forward P/E of 30 and expected to grow at 25%. The PEG ratio for Stock A is 75% (15/20) and for Stock B is 120% (30/25). According to the PEG ratio, Stock A is a better purchase because it has a lower PEG ratio, or in other words, its future earnings growth can be purchased for a lower relative price than that of Stock B.
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Cash-flow return on investment (CFROI) is a valuation model that assumes the stock market sets prices based on cash flow, not on corporate performance and earnings. [1]= For the corporation, it is essentially internal rate of return (IRR). [2]
Duration is a measure of the price sensitivity of a stock to changes in the long term interest rate, i.e., the longer the duration, the more sensitive the stock is to interest rates. In U.S. stock markets, an SEC rule adoption in 1982 (rule 10b-18) that allowed discretionary stock buybacks has distorted the calculation of duration based on ...
Current ratio vs. quick ratio vs. debt-to-equity Other measures of liquidity and solvency that are similar to the current ratio might be more useful, depending on the situation.