Educational Programming Video
The Value Line Investment Survey
Program 12: The Stock Price Chart at the Top of the Value Line Page
In this lesson we're going to continue a discussion of the information contained in the company pages of The Value Line Investment Survey. In the last session, we discussed the historical stock price information included in the Stock Price Chart at the top of each page, as well as the cash flow line that appears on most pages. In this session, I am going to speak about other data included in the area of the stock price chart, which appears near the top of every page.
Toward the bottom of each chart, there is usually a dotted line. That dotted line shows how the price of a stock is doing relative to all the other stocks included in The Value Line Investment Survey. When the line is moving up, the stock is acting better than the entire universe of 1,700 stocks followed by Value Line. When the line is falling, a stock is acting worse than the universe. There is some evidence that a stock that is acting better than the overall stock market will continue to do so for some time and that a stock that is acting worse than the market may also continue to act poorly for some time. However, while the line interesting, our Editors consider Value Line's Timeliness and Technical ranks to be better indicators of future relative performance of a stock, and we encourage investors to give more attention to them than to the relative strength line.
At the very bottom of each chart are vertical lines. These lines show the number of common shares traded each month as a percentage of the total number of shares outstanding. A scale on the left shows the percentages used in the graph. Professional investors who may be buying or selling large blocks of stock are often particularly interested in these figures because they show how actively traded a stock is. However, for most individual investors, the percentage of shares traded each month is not particularly important. Anyone wanting to trade one hundred, or even one thousand, shares of stock can usually do so without having an impact on the price of a stock. Only if the percentage of shares traded monthly is very low (say 1% or 2%) should you normally have any concern.
There are four other items of interest in each stock price chart. One is the Target Price Range, which we discussed in an earlier session.
A second is the LEGENDS box, which contains a number of useful pieces of information. The first is the cash flow multiple. This is the number, selected by an analyst, which is used to calculate the cash flow line. We multiply cash flow per share by this number to draw the cash flow line. By itself, the multiple is not terribly important. The fact that the multiple used for one company is small, say 5, 6 or, 7, and that used for another company is much larger, maybe 18, 19, or 20, is usually a reflection of the characteristics of a company, but not necessarily of the prospects for that company. We show the number primarily so that investors can have a full understanding of how we make our calculations.
The LEGENDS box also includes a list of any recent stock splits along with the month and date those splits occurred. Many investors are interested in the history of a company's stock splits, and we include this information for investors who want to know more exact stock dates than those shown elsewhere in the stock chart.
There is also an indication of whether options are traded on this stock. By looking here, investors can quickly see if there are options.
Finally, there is a box in the lower right hand corner of the chart that shows the total returns of both this stock and the general stock market for the past 1 year, 3 years, and 5 years. The total return includes any appreciation or depreciation of a stock or the stock market plus dividends. In each case, the 1-, 3-, and 5-year returns are for the full respective periodsthey are not annualized data.
The general stock market is measured by the Value Line Arithmetic Index, which is an equally weighted index of all of the approximately 1,700 stocks included in The Value Line Investment Survey. Because it includes 1,700 diversified stocks, it is considered by most observers to be a good representation of the stock market as a whole.
By looking at this box, an investor can easily see if a particular stock has done better or worse than the market as a whole over the past 1, 3, and 5 years.
Now we have covered the material in the Value Line stock price chart. In future sessions we will discuss other information in a Value Line page.
Factual material is obtained from sources believed to be reliable, but the publisher is not responsible for any errors or omissions, or for the results of actions taken based on information contained herein. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. © 2016 Value Line Publishing, Inc. RIGHTS OF REPRODUCTION AND DISTRIBUTION ARE RESERVED TO THE PUBLISHER. The Publisher does not give investment advice or act as an investment adviser. Value Line, Inc., its subsidiaries, its parent corporation and its subsidiaries, and their officers, directors or employees as well as certain investment companies or investment advisory accounts for which Value Line, Inc. acts as investment advisor, may own stocks that are mentioned on this Value Line Web site.