Key Industry Averages
Assessing company performance using BetterInvesting's Stock Selection Guide can be greatly enhanced with further review of several crucial criteria:
- % Pre-tax Profit on Sales. This pre-tax profit margin measures how well management converts sales dollars into profits before the impact of taxes or changes in the number of shares outstanding. Margins should be stable or on an uptrend, and compare well to peers and competitors in the company's industry.
- Return on Equity. This measures how well management produces profits from the money invested by its original investors. ROE should be stable or increasing, and compare well to peers.
- Debt-to-Equity. Debt levels vary considerably by industry, but in rising interest rate environments, companies with lower than average debt may see profitability less impacted.
- Revenue & EPS Growth. Long-term capital appreciation of a company's stock price is tied directly to the growth of revenues and earnings, thus faster growing companies provide opportunities for total return.
- EPS Predictability (R2)."R-squared" measures the consistency of a series of data points, or in other words how close to a straight line a series of points fall on a graph. An R2 value of 1.0 indicates that the data points form a perfectly straight line. Companies with a higher-than-average R2 have shown the ability to grow EPS more consistently than peers.
The following data is calculated on revenue-weighted basis for all companies in each industry. The data is generated weekly by ICLUBcentral's StockCentral.com web tool for fundamentally-focused stock investors. StockCentral subscribers access these industry averages, along with ranked lists of all companies in each industry and sector-level averages, all updated weekly. (Check out the complete list of features and information about a free trial at StockCentral.com.)