MRK

Capital-structure-agnostic valuation multiple. Useful for comparing levered companies because it adds debt and removes cash from the numerator and uses pre-interest, pre-tax, pre-depreciation earnings in the denominator.

The multiple equity analysts most commonly quote because it reflects expected earnings rather than the trailing window. Same caveats as trailing P/E - a depressed multiple may be a value trap if forward earnings are too optimistic.

Adds dividend yield to the growth denominator so mature dividend payers don't get unfairly punished by a low-growth PEG. Sweet spot ~1.0; below 0.5 is often a broken growth assumption, above 2 is over-paying.

Easier to compare than operating_margin across firms with very different leverage / depreciation profiles. Software platforms commonly run above 30%; capital-light service businesses cluster around 20%.

End-to-end conversion ratio: of every dollar of revenue, how much falls through to genuine free cash flow available to capital providers? More honest than net margin because it accounts for capex needed to maintain the business.

Joel Greenblatt's reformulation of return-on-capital that excludes goodwill, acquired intangibles, and financial assets, focusing instead on the tangible operating capital that actually generates EBIT. Pairs with Greenblatt's Earnings Yield (EBIT/EV) to produce the Magic Formula rank.

Operating margin minus interest, tax, and below-the-line items. Useful but noisy because tax rate and debt service distort year-to-year comparability.

Pre-capex version of cash conversion. Numbers persistently below 1 suggest accruals are doing the work; numbers persistently above 1 are a (mild) positive sign.

Capital-efficiency measure that ignores how the assets are financed. Useful for comparing within a sector but biased low for asset-heavy businesses (banks, utilities) and high for asset-light ones.

Headline profitability metric. High ROE compounds book value if the business can reinvest at the same return. Beware of buybacks artificially inflating ROE by shrinking the denominator.

Strips out receivables and inventory, leaving only cash and equivalents over current liabilities. Stress-tests whether the business can meet obligations even if collections seize up.

Solvency-under-stress measure. A ratio of 1x means EBIT exactly covers interest with nothing left over; 5x is comfortable for an industrial; below 2x is a credit-watch level. Especially important when leverage is rising or profits are cyclical.

Bond covenants are commonly written against this ratio. Above ~5x is high-yield territory; investment-grade industrials typically run below 3x. Negative net debt (more cash than debt) means the firm could pay off its bonds and still hold cash.

The acid-test variant of current ratio strips inventory from current assets, since inventory can be stale or written down before it becomes cash. Sweet spot 1.2x; below 0.5x signals liquidity stress, above 3x signals trapped working capital.

Direct income from holding the share. Stable dividend yield often signals capital discipline; abnormally high yield can be a warning that the dividend isn't covered by FCF and may be cut.

Sustainability check on the dividend yield. Below 30% means the dividend has room to grow; 30-60% is the conventional sweet spot; above 85% is stretched and frequently precedes a cut. REITs and utilities run higher than the broad market by design.

Five-factor distress signal originally calibrated for US public manufacturers. Above 3.0 is the conventional 'safe' zone, 1.8-3.0 is the grey zone, below 1.8 historically associates with elevated bankruptcy risk.

Beneish (1999) calibrates eight financial-statement indices against a sample of known manipulators. M < -2.22 reads as unlikely manipulator; M >= -1.78 as likely manipulator; the gap is grey. Companion to Altman Z but for fraud risk rather than bankruptcy.

Buys oversold pullbacks within an established uptrend (price above the 200-day SMA). Holds while RSI(2) is below an exit threshold; exits when RSI(2) crosses above 60.

+1 when price is above regime_ma and RSI(2) drops below oversold; held while inside the trade; back to 0 when RSI(2) crosses above exit.

+1 = pullback-buy state active, 0 = flat. Bear-side variant uses the symmetric short rule.

Bullish when %K crosses above %D while both lines are below the oversold threshold; bearish when %K crosses below %D while both are above overbought.

+1 on bullish cross in oversold; -1 on bearish cross in overbought; 0 otherwise.

+1 = oversold bullish cross, -1 = overbought bearish cross.