Educational Programming Video
The Value Line Investment Survey - Small and Mid-Cap Edition
Program 4: The Ratings and Reports Page - Part 2
The Small and Mid-Cap Edition was introduced as the result of market research, which showed that Value Line Investment Survey subscribers were interested in information on more stocks, but that they also wanted the information to be available at a relatively low price. The features and information the Small and Mid-Cap Edition offers are very similar to that provided in the Value Line Investment Survey-Standard Edition, but there are some important differences. As a result, we feel it important to review the specific details of what the Small and Mid-Cap Edition offers subscribers, even though you may be familiar with the Standard Edition.
In this session we will our discussion of items on the Ratings & Reports page. These are the full-page company reports.
Let's begin by picking up where we left off in our last lesson, where we completed our review of Earnings Predictability, located in the top left side of the page. Moving to the right, we have the Legends box, where we identify the historic stock splits and stock dividends for up to nine years. Note that many Small and Mid-Cap Edition stocks have not been public for nine years. Also identified are the twelve month moving average and the Relative price strength lines. The twelve-month moving average is comprised of the average of the midpoints between the monthly highs and lows for the past twelve months. As a result of this computation, the line does not begin to be shown until twelve months after a stock's public trading has begun. The relative strength line, which is dotted, compares the price of a stock with the price of the Value Line Arithmetic Composite Index over time. When the line is rising, the stock is performing better than the broad index, when it is falling, the stock is performing worse than the broad market. The stock price chart shows the monthly range of prices as well as the monthly stock volume. Note that the price chart is on a ratio grid, so that a 10% advance looks the same whether a stock moves from $10 to $11 or $100 to $110. And all historic stock prices have been adjusted for stock splits and stock dividends. Finally, the high and low stock price for each calendar year is on the top of each stock chart.
Now we can review the statistical array in the center of each page. For most companies, we show a standard company array, but we do have special arrays for banks, insurance companies, securities brokers, and retail stores. It is important to note that the data shown in these arrays correspond to the data elements you are familiar with in the Value Line Investment Survey. For most companies, the top five data elements are expressed in dollars per share. In this way, you can see the growth trend in sales, cash flow, earnings, dividends and book value for up to nine years, adjusted for any changes in the number of shares outstanding during that time. These trends can also be studied in the ANNNUAL RATES box just below the array on the left side of the page. In addition to growth in sales and profits, growing companies often show growth in profit margins. One of two profit measures we show for most companies is the operating margin, which indicates what percentage of sales is being converted into operating income. Operating income is total sales minus cost of goods sold and selling, general, and administrative expenses. The other is the net profit margin which shows a company's net growth (after all expenses, including taxes) as a percent of sales. The net profit margin should be compared with the operating margin.
Usually the two series move together, though not always. Depreciation charges, interest expense, income taxes, and other costs are deducted from, and other income added to operating income in the determination of net profit.
Consensus earnings estimates are also shown in the annual array when available. Footnotes inform subscribers how many analysts contributed to the estimates and if any analysts changed their earnings estimate for the current year within the last 30 days. Consensus 5-year earnings growth estimates are also provided as available, which is expressed on an average annual percentage basis. Next year's consensus earnings estimates are also often available, with a footnote indicating how many analysts contributed to the estimate.
This ends our current session discussing the contents of the Small and Mid-Cap Edition page.
Again, thank you for visiting us here at ValueLine dot com. Have a prosperous day.