Guide to Value Line Page/sfb The Value Line Investment Surveyâ

Guide to Value Line Page/sfb The Value Line Investment Surveyâ
Understanding (Title page) The Value Line Investment Surveyâ

Guide to the Value Line Page
Guide to Value Line Page/sfb Guide to the Value Line Page (Title Page)

Slide Presentation developed by Sandra F. Barlow BetterInvesting
Guide to Value Line Page/sfb Slide Presentation developed by Sandra F. Barlow BetterInvesting With the cooperation of Value Line Publishing, Inc. The Value Line Investment Survey is copyrighted by Value Line Publishing, Inc. No reproduction of the publication is permitted without the approval of the publisher. The Value Line Investment Survey is copyrighted by Value Line Publishing, Inc. This is a reminder that no reproduction of the publication is permitted without approval of Value Line.

Guide to Value Line Page/sfb
NAIC is a national non-profit organization whose mission is to educate investors about investing in common stocks and mutual funds. BetterInvestingTM A non-profit, educational organization

About Value Line Began during The Depression Public company--80% family owned Developed methods for evaluation of stocks 1965--Timeliness Ranking System 70 analysts Almost all numbers in VLIS developed by analysts Value Line was founded in 1931. It is a public company, 80% owned by the family of the founder. The company is widely known for its Timeliness Ranking System, which ranks the future relative performance of the approximately 1,700 stocks Value Line follows on a scale of 1 (Highest) to 5 (Lowest). It employs 70 security analysts and many more statisticians, data collectors, and support staff. Almost all the data on a Value Line page are input by analysts. (Arnold Bernhard started company----Wanted to answer the question: Are stocks fairly priced?)

Value Line Investment Survey
Guide to Value Line Page/sfb Value Line Investment Survey Published weekly Covers about 1700 stocks, 90 industries Each page revised every 13 weeks Then cycle begins again, updating data Companies categorized into industries Supplementary Reports The Value Line Investment Survey is published weekly. It includes one-page reports on approximately 1,700 companies and one- or two-page reports on more than 90 industries. Each page is revised every 13 weeks (once a quarter) on a fixed schedule. All companies are grouped alphabetically by Industry. That is, all the drug companies are together, the semiconductor companies together, etc. Important news developments (unusually good or bad earnings, mergers or acquisitions, etc.,) are included at the back of each week’s Ratings & Reports in a section called Supplementary Reports.

Three Parts of the Investment Survey
Guide to Value Line Page/sfb Three Parts of the Investment Survey Part I - Summary and Index Part II - Selection and Opinion Part III - Ratings and Reports There are three parts to The Value Line Investment Survey: Part 1: Summary & Index Part 2: Selection & Opinion Part 3: Ratings & Reports

We will concentrate on Part III, Ratings and Reports for this program But before that…….. To get the most out of The Survey, you should be familiar with all three parts. Today’s presentation will concentrate primarily on Ratings & Reports, the part that includes the full-page reports on companies and industries. But, before we go to Ratings & Reports, we’ll briefly discuss the other parts.

Summary & Index (Part 1) The first is the Summary & Index (called Part 1) which contains: Stock market statistics and other data on the front cover (shown here) An alphabetical listing of all stocks covered, beginning on page Look there to find page numbers A weekly updating of most financial statistics A variety of stock lists (usually called screens) which can provide ideas for stocks to buy or sell

Companies listed alphabetically Variety of data, updated each week Page number Here is a look at the second page of The Index. You can see that the companies are listed alphabetically. To the left of each name is the page number of each report. To the right are financial data which are updated each week.

Selection and Opinion (Part 2) The next section is Selection & Opinion (called Part 2) which contains: Economic and stock market commentary One page detailed reviews of one or two stocks (called Highlights if they are about a #1 ranked stock) Three hypothetical stock portfolios for various objectives, designed to give investors some guidance in setting up their own portfolios Stock lists (screens), based on various investment objectives A wide variety of statistics relating to the stock market and the economy And more

Ratings and Reports (Part 3) Now we will talk about Ratings & Reports. This slide shows a picture of the cover, which contains a list of all the companies in the current week’s issue, with asterisks next to the names of stocks with favorable Timeliness ranks. It also provides comments on stocks considered noteworthy in a particular week.

Ranks Chart Statistical Array Forecasts Here is a sample Value Line company report. You can see the Timeliness, Safety, and Technical ranks in the upper left hand corner. The stock price chart is at the top of the page. Stock Price and financial forecasts appear in several sections. Balance sheet and income statement data appear in the center. Quarterly data are in the lower left. The Analyst’s written commentary is in the lower right. Analyst's Commentary Quarterly Data Ratings

Sources of Input Annual reports SEC reports Company officials Analysis of competitors Industry/trade data Other Where does the information come from? Annual and Quarterly Company Reports Reports filed with the SEC (Securities and Exchange Commission) Company Officials Analysis of Competitors Industry/trade data Other Sources (Conference calls are popular now with company executives and analysts.)

Across the top of page……. Across the top of the page are: The company’s name The stock exchange on which the stock is traded - usually New York Stock Exchange (NYSE), American Stock Exchange (ASE), or NASDAQ (NDQ). The ticker symbol, usually three or four letters used to identify a stock for trading purposes. The stock price just prior to the time the Value Line report went to press. You can look in your newspaper for the latest price. Name of company Exchange Ticker Price

Value Line’s P/E Ratio Recent price divided by sum of the past 6-month earnings per share (EPS) plus next six months estimated EPS Here is the Value Line Price/Earnings Ratio. Value Line calculates the ratio by dividing the current price by the sum of the most recent 6-month earnings per share (EPS) plus the estimated earnings for the next six months. (Don’t mix newspaper P/E with Value Line P/E--use one or the other.)

Example of Value Line’s P/E Ratio Last 6 months earnings = $ Next 6 months earnings = Total 12 month earnings $ STOCK PRICE IS $20 $20 divided by $ = earnings price P/E ratio  =

(In parenthesis) Trailing P/E - recent price divided by past 12 months reported EPS (newspapers use trailing) Median P/E - average annual P/E ratio of a stock over past 10 years with certain statistical adjustments made for unusually high or low ratios Trailing Price/Earnings Ratio This is calculated by dividing the current price of the stock by earnings per share for the past 12 months. This is the number used in most newspapers. (They don’t have access to forecast data as Value Line does.) Median Price/Earnings Ratio This is the average of the middle values of a company’s P/E ratios over the past 10 years, with certain statistical adjustments. It is meant to show the typical historical P/E of a stock.

Relative P/E Ratio Compares the P/E of one stock with the P/E of all the stocks in the Value Line universe The Relative P/E Ratio of a stock compares the P/E of one stock with the P/E of all the stocks in the Value Line universe. (If a stock has a particularly high or low relative P/E ratio, find out why. If you can’t figure out why, you may want to leave the stock alone until you know more.)

Example of Relative P/E Ratio
Guide to Value Line Page/sfb Example of Relative P/E Ratio P/E of stock = 25 P/E of Value Line universe = 16 (on front page of Summary & Index) Relative P/E = 1.56 Example: Relative P/E = P/E of a Stock (25) divided by the P/E of the Value Line universe (16) = Whenever a stock’s relative P/E is more than 1, its own P/E is greater than that of the market. Whenever a stock’s relative P/E is less than 1, its own P/E is less than that of the market. Above 1 = above average Below 1 = below average

Dividend Yield Projected dividends, next 12 months divided by recent price and expressed as a % An annual dividend is the yearly payment (usually in cash and usually paid quarterly) that a company makes to its shareholders. The dividend yield measures the expected cash dividend to be paid in the coming 12 months as a percent of the current price of a stock. Recently, the average yield of all dividend-paying companies in the Value Line Investment Survey was about 1.8%. (To the instructor: After this slide, we deleted a slide because we thought it might be too elementary. In making the presentation, the speaker might want to mention a word about the page number. The page number of a particular stock remains fairly consistent in subsequent issues. A page number may change as stocks are dropped or added.)

Example of Dividend Yield
Guide to Value Line Page/sfb Example of Dividend Yield Projected dividend = $ 1.20 per share Stock price = $50 $1.20 B $50 = 2.4% Here’s an example of Dividend Yield: The projected dividend for next 12 months (found in Statistical Array) is $1.20 per share. You divide that by the price of the stock $50 to get the dividend yield. In this case, the dividend yield is 2.4%.

Timeliness, Safety, Technical Ranks
Guide to Value Line Page/sfb Timeliness, Safety, Technical Ranks Core of Value Line’s Advice Value Line’s proprietary Timeliness, Safety, and Technical ranks appear in the box in the upper left hand corner of each page.

Timeliness Expected price performance next 6-12 months for each stock relative to all others in Value Line’s 1700 stock universe Timeliness is the expected performance of a stock over the coming 6-12 months relative to all other stocks in the Value Line universe. (Each January and July the results of the performance of the Timeliness ranks are published in Selection & Opinion.)

Timeliness Timeliness Ranks 100 in group 1 (Highest) 300 in group 2 900 in group 3 300 in group 4 100 in group 5 (Lowest) Timeliness ranks go from 1 (highest) to 5 (lowest) At any one time, there are: 100 stocks ranked 1 (Highest) 300 stocks ranked 2 (Above Average) 900 (approximately) stocks ranked 3 (Average) 300 stocks ranked 4 (Below Average) 100 stocks ranked 5 (Lowest)

Timeliness Ranking of 3, average Ranking 4 or 5 are likely to underperform Ranking of 1 and 2 are likely to perform best Earnings growth and stock price momentum are very important factors Stocks with ranks of 1 or 2 are likely to perform best Stocks with ranks of 3 are likely to be average Stocks with ranks of 4 or 5 are likely to be below-average Earnings growth and stock price momentum are very important factors (As an aside: In the Expanded Edition of Value Line (small stocks) the PERFORMANCE RANKS are very similar to Timeliness ranks.)

While Value Line makes much of the record of its Timeliness ranks, investors are still interested in verification by independent parties. One person who tracks the record of many newsletters is Mark Hulbert, a columnist for Forbes and the New York Times. He is on record as saying that since the mid 1980s Value Line's record is the best of all newsletters.

to others in Value Line universe
Safety Measure of the Financial Risk and Price Volatility of one stock compared to others in Value Line universe The Safety rank measures the risk (volatility) of one stock relative to others in the Value Line universe. As with Timeliness, Safety ranks go from 1 (highest) to 5 (lowest).

Safety Based on: Company’s Financial Strength (financial condition--strong balance sheet) Stock’s Price Stability (ranking of standard deviation of weekly percent changes in price over last five years) Safety is based on a company’s Financial Strength (its financial condition and strength of its balance sheet) and… Its Stock’s Price Stability (a ranking of the standard deviation of weekly % changes in price over the past five years). (The Financial Strength rating and Stock’s Price Stability score are both shown in the lower right hand corner of each page.) (When whole market goes down, the stocks ranked 1 for Safety go down less than most, as a rule.)

Safety Ranking of 1 or 2 most suitable for conservative investors Safety ranks of 1 or 2 are most suitable for conservative investors.

Technical Predictor of stock’s short term (3 - 6 months) relative price change The Technical rank is a predictor of a stock’s short term (3-6 months) relative price change. Note that the time horizon is shorter than the 6-12 months for the Timeliness rank. (Value Line has been doing Technical rank for more than 20 years. Only recently have they started putting it in the ranking box on the page.)

Technical Based on Multiple regression analysis using a proprietary model which examines 10 relative price trends of stock over different periods over past year Recent volatility of the stock price The Technical rank, which is proprietary, is based on a multiple regression analysis of 10 different stock price trends over the past year. The recent volatility of a stock is also important.

Beta Stock’s sensitivity to fluctuations of the market as a whole (measured against the New York Stock Exchange Composite Index) Beta measures a stock’s price sensitivity to fluctuations of the market as a whole. If a stock’s Beta is 1.5, and the market as a whole goes up 50% (as measured by the New York Stock Exchange Index), then that particular stock might go up 75%. The reverse is also true.

High and Low Price Estimates
Guide to Value Line Page/sfb High and Low Price Estimates Value Line’s High and Low Price Projections are shown in this box and also in the chart in the upper right hand corner. In this case, Value Line is predicting that a stock will trade in a range of $18 to $25 per share a number of years in the future. That means the stock’s appreciation is likely to be somewhere between +30% and +80%. The annual total return, including dividends, is likely to be between 10% and 18%. This is a stock that may merit further study. . (NOTE: This projection is 3-5 years; Timeliness is 6-12 months.)

Insider Decisions Number of transactions each month by officers and directors Buy stock, exercise options, or sell stock This box shows purchases of stock, exercise of stock options, and sales of stock by company “insiders.” Insiders are normally defined as officers and directors of a company. It shows the number of transactions in each category each month. (Some analysts think this statistic is very important; others give it little or no weight.) (Many officers who receive options turn around and sell them, perhaps to balance their portfolios or some other reason.)

Institutional Decisions
Guide to Value Line Page/sfb Institutional Decisions Number of times institutions with more than $100 million of assets bought or sold stock during past three quarters Total number of shares held by those institutions at end of each quarter This box shows the number of times institutions with more than $100 million of assets bought or sold stock during the past three quarters. It also shows the total number of shares held by institutions at the end of each quarter.

Highest Lowest Calendar Year The high and low calendar year prices are shown at the top of each chart. A calendar year is Jan 1 - Dec 31. The calendar years are shown at the bottom of the chart. Stock’s highest and lowest price of the calendar year Corresponds to years below

Value Line Chart Vertical bars show price ranges for each month Monthly highs and lows In this chart, the vertical bars represent the high/low monthly price ranges for a stock.

Value Line Chart Stock splits are noted... Value Line adjusts all historical data every time there is a stock split (2-for-1, for example) or stock dividend (10%, for example). The split indicators are shown on the graph and also in the Legends Box.

Value Line Chart Dotted line shows Relative Strength Compares price of the stock over time with the Value Line Arithmetic Index When Relative Strength line is rising, stock is acting better than the market….. The dotted line toward the bottom shows the Relative Strength of a stock. It compares the price of a stock at any one time with the price of the Value Line Arithmetic Index (a good broad representation of the stock market). If the Relative Strength Line is rising, the stock is acting better than the market; if the line is falling, the stock is acting worse.

Value Line Chart Dark solid line is “cash flow” line (“Value Line”) The line is a multiple of the cash flow per share and is graphed over time The solid dark line is a “cash flow” line, sometimes called the “Value Line”. One theory is that the price of a stock will tend to gravitate to this line. When the price of a stock gets above the line, the tendency over time will be for that price to go back down toward the line; when it gets below the line, there will be a tendency for the price to rise up to the line.

Legends Box Shows cash-flow multiple and relative strength Shows stock splits Indicates Options Trading The Legends Box contains a number of useful items. First, it explains what the solid line and the dotted line are. Then, it shows the “multiple” of cash flow per share (shown in the statistical section below) which is used to plot the “Cash Flow” line. The multiple is a number determined by an analyst to develop a line which most closely matches the actual prices of a stock. Then, it shows how Value Line calculated the Cash Flow Line (X times the cash flow number shown below in the statistical section). It also gives the dates of stock splits, indicates if there are options traded on a stock, and explains the shaded recession bar.

Value Line Graph (bottom)
Guide to Value Line Page/sfb Value Line Graph (bottom) Number of shares traded monthly as a percentage of the total shares outstanding “Percent shares traded” noted to the left Here you can see the % of a company’s outstanding shares that are traded each month. The % figures are shown on the left side.

Target Price Range The Target Price Range shows the expected price range of a stock in a period 3 to 5 years into the future. Dashed lines show range of projected high/low prices 3-5 years hence

% Total Return Historical total return (includes cash dividends) for stock 1 year 3 year 5 year Historical total return of the stock market market measure used is Value Line Arithmetic Index based on all 1700 stocks in the publication This box shows the historical total return of a stock (appreciation or depreciation plus any cash dividends) over the past 1, 3, and 5 years and also the total return of the Value Line Arithmetic Index over the same periods. The Value Line Arithmetic Index is an equally weighted index of the 1,700 stocks followed in the Value Line Investment Survey. Because of the large number of stocks included in this index, it is generally considered to be representative of the broad market. The 3 and 5 year figures are totals for those periods. They are not annual figures and they do not allow for any compounding effect from the reinvestment of dividends.

Any questions about upper part of page?
Guide to Value Line Page/sfb Any questions about upper part of page? Any questions about the top part of the page?

Statistical Array Now, we are going to look at the large number of numbers in the center of each page. It is referred to as the Statistical Array. One item of note here: Every time there is a stock split (2-for-1, for example) or a stock dividend (10% stock dividend, for example) all historical stock prices and per share data (sales per share, earnings per share, etc.,) are adjusted for the stock splits and dividends. This is the practice followed by all financial information services, and also by the companies. This is the main reason why figures may change considerably from one Value Line report to the next.

Statistical Array Above double line per share data Lower series gross basis Historical (left) Projected (right) bold italics There are two basic sections to the Statistical Array. The numbers above the double line are all per share data. The numbers below the line are total (or gross) ones. Also, the numbers to the left are Historical; the numbers to the right (in bold) are Projections.

Projected next yr Projected 3-5 yrs The arrow to the left points to next year’s projected results. The arrow to the right points to financial projection 3 to 5 years in the future.

Value Line Uses Normalized Data Earnings data “normalized” to exclude unusual gains or losses Designed to present an accurate picture of “real” earnings Large one-time charges (or gains) tend to distort the actual earning power of companies so Value Line excludes them This is a good point to indicate that Value Line uses “normalized” data, designed to exclude unusual gains or losses, in its statistics. Such data are designed to present an accurate picture of the ongoing results of a corporation. Inclusion of large one-time gains (possibly from the sale of a business) or losses (possibly from closing an unprofitable division) distort the actual earning power of companies. For that reason, Value Line excludes them.

closed major factory incurred special charge $150 million ($1.50 per share) reduced value of building reduced value of inventories severance pay reported earnings $0.30 In this example, a company with share earnings of $1.00, $1.25, and $1.50 in three consecutive years, suddenly reported profits of only $0.30 a share in 1998. The reason was that it incurred special, one-time, after-tax charges of $150 million ($1.50 a share) from closing a factory.

$180 $1.80 Does 30 cents a share reflect the company’s real earning power or ability? No! $150 million charge is one-time (non-recurring) Value Line would add back the $150 mil, show adjusted earnings as $180 mil ($1.80 EPS) Value Line’s analyst concluded that the reported $0.30 profit did NOT reflect the company’s real earning power. The $150 million (1.50 per share) charge was a one-time, non-recurring expense. Value Line, therefore, added back the $1.50 charge and showed the true earning power to be $180 million ($1.80 a share). In this example, “normal” earnings are $180 million or $1.80 a share (the $30 million the company reported plus the $150 million one-time charge). For forecasting purposes, we would expect earnings to move from the $1.80 base. To use a base of $.30 would be very misleading.

By normalizing the data….
Guide to Value Line Page/sfb By normalizing the data…. We can see the company’s normal earning power We can use the normal number as a base for forecasting By normalizing the earning power, Value Line attempts to provide investors with the most realistic base from which to start forecasting the future.

Items in Statistical Array (First six items listed below are all per share) The Statistical Array contains a great many financial numbers and ratios. At the top are: Sales Per Share (Sales divided by shares outstanding) Cash Flow (the total of net income plus depreciation and amortization) Per Share Earnings Per Share Dividends Per Share Capital Spending Per Share Book Value (or Common Shareholders’ Equity) Per Share Common Shares Outstanding These are all commonly used items and are defined in most financial glossaries. Sales Cash Flow Earnings Dividends Capital spending Book Value Common Shares Outstanding

Average Annual P/E Ratio Relative P/E Ratio Average Annual Dividend Yield Further down are: Average Annual P/E Ratio--average annual stock price divided by earnings per share for the year. Relative P/E Ratio--the average annual P/E divided by the average annual P/E of the Value Line universe. Average Annual Dividend Yield -- dividends declared per share divided by average annual price.

NOTE: Lower part of statistical array is on gross basis
Guide to Value Line Page/sfb NOTE: Lower part of statistical array is on gross basis Sales (Revenues) Operating Margin Depreciation Net Profit Income Tax Rate Net Profit Margin Working Capital Long-term Debt Shareholders’ Equity More statistics: Sales or Revenues (in millions): 325 means $325 million; 1500 means $1.5 billion Operating Margin: operating earnings (earnings before interest charges, depreciation, or taxes) as a percent of sales or revenues Depreciation: an amount charged against revenues to reflect the aging of plant or equipment Net Profit: total profit after taxes but before non-recurring items Income tax rate: total income taxes (Federal, local, and foreign) as a percent of earnings before taxes Net Profit Margin: net income as a % of sales or revenues Working capital: current assets minus current liabilities Long-term Debt: all debt due more than one year in the future Shareholders’ Equity: the total of common and preferred shareholders’ equity (a balance sheet item)

Return on Total Capital Return on Shareholders’ Equity Retained to Common Equity (also called Plowback Ratio) All Dividends to Net Profit (also called Payout Ratio) Finally: Return on Capital: annual net profit plus half of annual long-term interest divided by the total of shareholders’ equity and long-term debt Return on Shareholders’ Equity: annual net profit divided by year-end shareholders’ equity Retained to Common Equity: net profit less all common and preferred dividends divided by common equity. (Also called the Plowback Ratio since it shows the percentage of earnings being reinvested in the company.) All Dividends to Net Profits: the percent of profits paid out as dividends to shareholders. (Also called the Payout Ratio since it shows the amount paid out to shareholders.)

Any questions about the statistical array?
Guide to Value Line Page/sfb Any questions about the statistical array? Any questions on the statistical array?

Capital Structure Percentage of total capital in Long term debt Preferred stock Common stock Market Capitalization Balance Sheet Items The Capital Structure Box shows a variety of things, including: Percentage of total capital in Long-term Debt Preferred stock Common stock (Capital is defined as the total of Long-term Debt and Shareholders’ Equity. The above numbers do not refer to market value as shown in Market Capitalization on the next slide.) Market Capitalization

Market Capitalization: Dollar value of common stock outstanding
Guide to Value Line Page/sfb Market Capitalization: Dollar value of common stock outstanding Number of shares outstanding times price of one share of stock Market Capitalization is the dollar value of common stock outstanding. It is calculated by multiplying the number of shares outstanding by the price of one share of stock. Large Capitalization Issue = $5 billion or more Mid Capitalization Issue = $1 billion to $5 billion Small Capitalization Issue = less than $1 billion Large cap - $5 billion or more Mid cap - $1 billion - $4.9 billion Small cap - less than $1 billion

Market Capitalization differs from Total Capitalization which the NAIC defines as Total Debt plus Equity Market Cap is helpful in understanding the level of investor interest in a stock Example: Large institutional investors tend to invest in large caps Total Cap (particularly its breakdown between debt and equity) is helpful in understanding the financial condition of a company’s balance sheet Market Capitalization differs from Total Capitalization, which the NAIC defines as Total Debt plus Equity.* Market Capitalization is helpful in understanding the level of investor interest in a stock. Large institutional investors, for example, tend to invest in Large Cap stocks. Total Capitalization (and particularly its breakdown between debt and equity) is helpful in understanding the financial condition of a company’s balance sheet. * (Common Equity = Book Value X Shares Outstanding)

Current Position in Millions of $
Guide to Value Line Page/sfb Current Position in Millions of $ Current assets Current liabilities This slide shows the current assets and current liabilities of a company. Historically, it was felt that most companies’ current assets should be twice those of its current liabilities. That is not necessarily the case today. Many large companies actually have current assets that are less than current liabilities.

Annual Rates of Change This slide shows annual compound rates of change of a company’s sales, cash flow, earnings, dividends, and book value over the past 10 and 5 years and the expected growth 5 years into the future. It provides a snapshot of the direction of historical growth (has it been increasing or slowing?) as well as an easy-to-see idea of what the analyst is looking for in the future. In each case, the growth rates are calculated from a base which is the average of 3 years to an ending period which is also the average of 3 years. (This is MOST IMPORTANT!) (The rates of change are also compounded rates.) Per share basis Historical Estimated next 3-5 years

Business Condensed summary of products, markets, etc. Significant shareholders Company’s address and phone number Internet address The Business Summary includes: A condensed summary of a company’s operations, showing important products, markets, etc. Any significant shareholders (owning more than 5%) A company’s address, telephone number, and Internet address

Analyst's Commentary The Analyst’s Commentary is thought by many investors to be the most important item on the page. This is where a Security Analyst can describe the outlook he/she sees for a company in the coming years, and, normally, provide reasons for his/her forecasts.

Analyst’s Commentary Expectations for the future An explanation of the forecast An explanation of the trends Other insights Analyst’s name and date in lower right The Commentary can include: Expectations for the future An explanation of the forecast An explanation of trends Other insights about new developments that may not be readily apparent The Analyst’s name and publication date appear in the lower right.

Quarterly Data Sales (Revenues) EPS Quarterly Sales, Earnings, and Dividend Data are shown here. An examination of the trends in quarterly sales and earnings can often provide insights into changing conditions. For example, did sales and earnings grow faster or slower in the more recent quarter or two than previously? Dividends

Quarterly Data Full Fiscal Year is Annual Data Numbers in bold italics are projections Note: Dividends paid in CALENDAR year Full fiscal-year data is shown in the right-hand column. The Quarterly numbers in bold italics are projections. Dividends shown are those paid in a CALENDAR year.

Quarter in column farthest right is end of fiscal year
Guide to Value Line Page/sfb Quarter in column farthest right is end of fiscal year The heading over the fourth column of numbers in Quarterly Sales and Earnings Per Share shows when a company’s fiscal year ends. (NAIC: When doing an SSG on Investors Toolkit or Stock Analyst, “fiscal year ends” is an important piece of information to key into the computer.) (By looking at the quarterly information on the Value Line sheet, we can easily see when the fiscal year ends by noting the month of the fourth column which is the last quarter of fiscal year.)

Footnotes Explain a Number of Things
Guide to Value Line Page/sfb Footnotes Explain a Number of Things Way earnings are reported basic diluted Unusual gains and losses Dividend Reinvestment Plan (DRIP) available Special explanations as necessary Footnotes explain a lot, including: The way earnings are reported: basic or diluted Unusual gains or losses The availability of DRIPs (Dividend Reinvestment Plans) Dividend payment dates Special explanations, as necessary

Ratings in Lower Right Box
Guide to Value Line Page/sfb Ratings in Lower Right Box Various ratings are shown in the box in the lower right: Company’s Financial Strength Stock’s Price Stability Price Growth Persistence Earnings Predictability

Company’s Financial Strength
Guide to Value Line Page/sfb Company’s Financial Strength Measure of company’s financial condition Largest companies with strongest balance sheets get best ranking Company’s Financial Strength A++ is top rating C is lowest rating Company’s Financial Strength: This is a measure of a company’s ability to weather hard times, relative to the other companies Value Line follows. It is based on a variety of factors including the amount of debt relative to shareholders’ equity, the basic risks of the business, and the size of the company. In many ways it is similar to a bond rating. The ratings go from A++ to C in nine steps. A++ is the highest. C is the lowest and is reserved for companies with serious financial problems.

Examples of Financial Strength
Guide to Value Line Page/sfb Examples of Financial Strength GE A++ Merck A++ AFLAC B++ Examples of Financial Strength GE A++ Merck A++ AFLAC B++ Mellon Bank B++ Kmart C++ (NAIC instructors are encouraged to update the examples periodically.) 8/99

Price Stability Based on an examination of the weekly volatility of the price of a company’s own stock over the last five years 100 is highest 5 is lowest Stock’s Price Stability: This is based on a ranking of the standard deviation of weekly percent changes in the price of a stock over the last five years. The lower the deviation (or volatility), the more stable the stock price. The top 5% (most stable) carry a Price Stability score of 100; the next 5%, 95%; and so on, down to 5.

Examples of Price Stability
Guide to Value Line Page/sfb Examples of Price Stability Heinz 95 Wrigley (Wm) 90 Pepsi 75 Harley-Davidson 50 Examples of Price Stability. Heinz 95 Wrigley (Wm) 90 Pepsi Co 75 Schering-Plough 75 Harley-Davidson 50 Fastenal 25 Dell Computer 15 8/99

Price Growth Persistence
Guide to Value Line Page/sfb Price Growth Persistence Historic tendency of stock to show consistent price growth compared to the average stock in the Value Line universe 100 is highest 5 is lowest Price Growth Persistence: This is a measure of the consistency of relative annual stock price growth. Using each of the past 10 years (or less if 10 years is not available), a count is made of the number of subsequent years in which the relative stock price was higher than in the base period. The resulting ratios are then ordered from 100 down to 5. The top 5% score 100, etc.

Examples of Price Growth Persistence
Guide to Value Line Page/sfb Examples of Price Growth Persistence Here are some examples of Price Growth Persistence. Cisco 100 Gateway 90 Bed Bath & Beyond 90 Gap 70 Boeing 50 Maytag 35 Limited 20 8/99

Earnings Predictability Derived from standard deviation of percentage changes in quarterly earnings over a 10-year period (if available) 100 is highest rating 5 is lowest Earnings Predictability: This is a measurement of the reliability of an earnings forecast, based on the variability of quarterly earnings over a 10-year period. Here, too, rankings range for 100 at the top (most stable and predictable) to 5 (lowest).

Examples of Earnings Predictability
Guide to Value Line Page/sfb Examples of Earnings Predictability Wal-Mart 90 Tiffany 45 Int’l Paper 35 Timberland 5 Here are examples of Earnings Predictability: Schering-Plough 100 Wal-Mart 90 Warner-Lambert 75 Tiffany 45 Int’l Paper 35 Timberland 5 8/99

Questions? Any questions?

The Value Line Investment Survey (End)

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