Investing glossary & guides

An estimate of what a business is genuinely worth, based on the cash it can generate over time — independent of its current share price. If the price sits below intrinsic value, the stock may be undervalued.

A valuation method that estimates intrinsic value by forecasting a company’s future free cash flows and converting them into today’s money. Because cash in the future is worth less than cash now, each year is “discounted” by a rate that reflects risk.

The blended rate of return a company must pay its lenders and shareholders, weighted by how much it uses of each. In a DCF it is the discount rate — a higher WACC (a riskier business) produces a lower intrinsic value.

Oak Growth’s 0–99 score for how cheap or expensive a stock is versus its sector, blending P/E, P/FCF, P/Book and EV/EBITDA against the sector median. A higher score means cheaper relative to peers.

The gap between a stock’s price and its intrinsic value, shown as a percentage. The wider the discount, the more room you have to be wrong about the future and still invest soundly — the core idea of value investing.

The share price divided by earnings per share — roughly how many years of current profit you are paying for the business. A high P/E implies the market expects strong growth; a low one implies caution, or value.

A durable advantage — brand, scale, network effects, switching costs or patents — that protects a company’s profits from competitors for years. Wide-moat businesses sustain high returns far longer.

The four tests a company must pass to appear in Oak Growth’s screener: Moat, Value, Financials and Management. Only companies that clear all four make the cut.

The S&P 500 version of the Buffett screen: the same philosophy, but recalibrated thresholds. Large US companies typically carry higher valuations and different balance-sheet norms than UK or European peers, so identical cut-offs everywhere would unfairly screen them out.

Net profit divided by shareholders’ equity — how efficiently a company turns its owners’ money into profit. Consistently high ROE, without leaning on excessive debt, is a hallmark of a quality business.

Total debt divided by shareholders’ equity — how much a company leans on borrowed money. Lower is generally safer, though the healthy level varies a lot by sector.

The cash left after a company has paid its running costs and reinvested in itself. It is the money genuinely available for dividends, buybacks and paying down debt — and it is much harder to manipulate than reported profit.

A company’s profit divided by its shares outstanding. Steadily growing EPS over time is the engine of long-term share-price growth.

The cash paid to shareholders for each share held. A sustainable, growing dividend is often a sign that reported earnings are backed by real cash.

An intangible asset recorded when a company pays more than book value to acquire another. Large or rising goodwill can flatter the balance sheet and sometimes signals overpaying — worth watching, as it can later be written down.

A snapshot of what a company owns (assets), what it owes (liabilities) and what is left for shareholders (equity) at a point in time. The two sides always balance: assets = liabilities + equity.

The profit-and-loss account: revenue at the top, costs subtracted line by line down to net profit at the bottom. It shows whether the business made or lost money over a period.

Tracks the actual cash moving in and out across operations, investing and financing. Often the most honest of the three statements, because cash is far harder to massage than accounting profit.

A company’s most comprehensive report, covering the full financial year — audited, detailed, and usually published two to four months after the year-end. The key event for assessing a business.

A mid-year update covering the first six months. Less detailed and often unaudited, but important for tracking whether a company is on course.

The official wire for announcements from UK-listed companies, run by the London Stock Exchange — where market-moving news such as results, deals and guidance is released. Oak Growth surfaces only the announcements that actually matter.

A momentum indicator from 0 to 100. Readings above about 70 suggest a stock may be overbought; below about 30, oversold — a gauge of whether a recent move has run too far.

The average closing price over the last 20, 50 or 200 days, which smooths out daily noise to reveal the underlying trend. When a shorter average crosses a longer one it signals a shift in momentum — the basis of the golden cross and death cross.

The number of shares traded in a period. High volume confirms conviction behind a price move; a move on thin volume is far less reliable.

Gold tends to rise when uncertainty, inflation or dollar weakness increase, because investors treat it as a store of value. It often moves opposite to confidence in the wider economy.

Oil prices drive energy-company profits and feed into transport and manufacturing costs across every sector, making them a barometer of global economic activity.

A basket of investments — often an entire index — that trades like a single share, giving instant diversification at low cost.

Like an ETF, but it tracks the price of a physical commodity such as gold, silver or oil — letting you get exposure without owning the physical asset.

Vanguard is among the world’s lowest-cost ETF providers and is owned by its own funds, and therefore its investors, rather than outside shareholders — so its incentives align with keeping costs low for ordinary investors.