Unlevered beta measures the Beta (a volatility indicator that denotes how closely an investment follows movements in the market as a whole) of a company when the effects of debt (leverage) are removed, allowing investors to gauge risk strictly as a function of company assets.
The beta of a company’s equity stock is a measure of volatility relative to the rest of the market, impacting Price-to-Earnings (P/E) calculations and other valuations. When beta increases, the cost of equity increases, and results in a higher P/E. Unlevering the beta can give a clearer picture of the market risk of a company’s equity shares, as higher debt relative to equity usually constitutes more risk to investors.
Operating leverage is a measure of how critical each sale of a company is to overall cash flow. It is used by corporations to raise capital without issuing more shares of stock, and it can have some tax benefits. If a company has high operating leverage, it means that it relies on fewer sales with very high gross margins, versus a company with low operating leverage that experiences higher levels of sales with lower gross margins. Taking on leverage usually means issuing bonds, and company earnings are first dispersed to the bondholders.
Unlevered beta is typically lower than or equal to levered beta; if the figure is positive, investors will look to capitalize by investing when stock prices are likely to rise, while a negative unlevered beta will usually see investors engage when stock prices may decline.
No one indicator is perfect, which is why savvy traders will look for additional signals to confirm – or force them to reconsider – potential trading decisions. Tickeron’s Artificial Intelligence, known as A.I.dvisor, gives traders powerful ways to evaluate trade ideas, analyze signals, and provide the key confirmation needed to make rational, emotionless, and effective trades.
Shareholders of a company are part-owners of the company, and they are entitled to two things: voting for board...
Conventional wisdom says that investing in gold might be a good hedge against inflation or market cataclysms
Taking a short position is selling a security that you don’t own, because you anticipate that its value is set to fall
Operating income offers a pure look at how a company effectively generates cash from internal operations
Accelerated amortization is the recalculation of an amortization schedule, after the borrower pays off some of the debt
B2/B ratings are the 15th ratings down the scale from the top. A bond in the B range has about a 20% chance of defaulting
Market indexes attempt to give an overall picture of the market by tracking the performance of a sample of stocks
Chapter 9 is a form of bankruptcy filing that is reserved for municipalities which have defaulted on their debt
Mortgage Equity Withdrawals (MEWs) are loans that use the equity in a home as the collateral (a.k.a. home equity loan)
Litecoin is very similar to bitcoin, but there are some distinct differences