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Using The Valuation Model - Terminology

If you are new to using the Valuation Model, it would be helpful to define the terms applied. Most terms and definitions can be found in any dictionary of financial terminology. Some terms proprietary to our model, will not be easily found.

Value Growth -- Value Growth is a measure of the anticipated growth and yield, discounted by P/E and expressed as a percentage. It represents the likely performance of a given issue relative to the market as a whole. Those greater than the current average or an arbitrary 100%, should perform better than the market average. Those less than the current average or an arbitrary 100% should perform less well than the market average. From time to time the average value of the market may vary from 60% to 120% depending on the selected universe of issues. This method gauges the growth and the cost of buying earnings for a given issue. OTC Stocks of course, should be expected to have higher values relative to large cap slower growth issues.

HIGH - LOW - FAIR Based on current information, FAIR is our calculated Fair Value for this issue. The High and Low are the range of prices that should contain all movement in an issue's price. Extreme ranging in HIGH - LOW, as well as negative values, should alert the reader to potentially aberrant conditions that have skewed the valuation, thereby questioning it's validity. We question such issues and their values..

Percentage Over / Under - Represents the percentage that the current price is Over or Under fair value.

Color Designation -- An important ingredient in the process of selection is our proprietary Color Designation assigned to each issue. Color designation is determined on the basis of expected relative price movement primarily in the 3-6 month horizon and predicted relative market performance in the year ahead. Upgrades and downgrades in subsequent reports as shown by changes in color, should guide you in your decisions.

Yellow -- The most positive of the designations indicates expected out performance. Cautious Buying and Holding for further appreciation is suggested. Issues dropping from Yellow to a lesser designation should be considered for sale.

Green -- Green designations signal good opportunities for possible accumulation . Such issues are expected to perform in-line with the market overall. These issues may be held in anticipation of better future performance or upgrades in color.

Blue -- Blue designations suggest under-performance relative to the market. Caution is in order. Issues rising from RED designation to blue may signal better potential. Falling color designation to BLUE should alert one to a potential for under-performance.

RED -- Red designations identify issues to be avoided now. These issues are expected to under-perform significantly.

Clear -- Issues designated as Clear are NOT RATED. Usually this designation marks the many over-the-counter issues which we do not rate.

Signals -- If Signal is BUY or SELL it should alert the reader to a substantially over or under valued issue. Remember, an issue that is aberrantly over or under valued may be that way for good reason, such as news of takeovers or introduction of new product, and could stay in that condition for an extended time. In and of itself, this indicator should not cause the reader to act unless other values, signals, and further research on the reader's part confirm this indicator.

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No product of MB Analysis is intended to constitute the sole source of research or guidance for any investment decision made or contemplated by any investor or investment group. Further information and research beyond those afforded by MB Analysis should be complete before any decision is made by any investor or investors' group to buy, to sell or to hold any equity or debt or any instrument derivative thereof.

Home - Value Groups - Using The Valuation - Value Investing Tips - DJ-30 Valuations