Value-investing glossary
Plain-language definitions for every metric and acronym you see across Wealthy. Bookmark this page and link back to it whenever a term confuses you.
- ROE / ROIC
- Return on Equity / Return on Invested Capital — how much profit a company generates per dollar of shareholder or invested capital. Higher is better.
- FCF
- Free Cash Flow — operating cash minus capex. The "real" money left over after running and growing the business.
- WACC
- Weighted Average Cost of Capital — the blended cost of equity and debt the company must beat to create value.
- EV/EBITDA
- Enterprise Value over earnings-before-interest-tax-D&A. A capital-structure-neutral valuation multiple.
- P/E (TTM / forward)
- Price divided by trailing or forecast earnings per share. The most common valuation shortcut.
- Piotroski F-score
- A 0–9 checklist of fundamental health — profitability, leverage, efficiency. Higher = healthier.
- Margin of safety
- Buffett's buffer: only buy when the price is meaningfully below estimated fair value, in case your estimate is wrong.
- Buffett spread
- Earnings yield (1/PE) minus the 10-year Treasury yield. Positive = stocks compelling vs bonds.
- Trimmed mean
- Average after dropping the highest and lowest values — robust to outliers.
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