Glossary

Beta measures the sensitivity of rates of return on a fund to general market movements.

Return on Equity (ROE) is a company’s net income (earnings), divided by the owner’s equity in the business (Book Value).

Return on Assets (ROA) is a measure of a company’s profitability, equal to a fiscal year’s earnings divided by its total assets, expressed as a percentage.

Price-to-Book is the weighted average of the price/book ratios of all the stocks in a fund’s portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. Stocks with negative book values are excluded from this calculation. In theory, a high P/B ratio indicates that the price of the stock exceeds the actual worth of the company's assets, while a low P/B ratio indicates that the stock is a bargain.

Price-to-Cash Flow represents the weighted average of the price/cash-flow ratios of the stocks in a fund's portfolio. Price/cash-flow represents the amount an investor is willing to pay for a dollar generated from a particular company's operations. Price/cash-flow shows the ability of a business to generate cash and acts as a gauge of liquidity and solvency. Because accounting conventions differ among nations, reported earnings (and P/E ratios) may not be comparable across national boundaries. Price/cash-flow attempts to provide an internationally-standard measure of a firm's stock price relative to its financial performance.

Price-to-Earnings is the weighted average of the price/earnings ratios of the stocks in a fund’s portfolio. The P/E ratio of a stock is calculated by dividing the current price of the stock by its trailing 12 months’ earnings per share. In computing the average, Morningstar weights each portfolio holding by the percentage of equity assets it represents, so that larger positions have proportionately greater influence on the fund’s final P/E.
Price-to-Book is the weighted average of the price/book ratios of all the stocks in a fund’s portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. Stocks with negative book values are excluded from this calculation. In theory, a high P/B ratio indicates that the price of the stock exceeds the actual worth of the company's assets, while a low P/B ratio indicates that the stock is a bargain.

Price-to-Sales is the sales yield for a fund is the asset-weighted average of the prospective sales yields of all the domestic stocks in the fund’s portfolio as of the date of the portfolio. A stock’s prospective sales yield is calculated by dividing estimated sales per share for the current fiscal year by the company’s month-end stock price as of the portfolio date. In computing the fund’s average, Morningstar weights each portfolio holding by the percentage of domestic equity assets it represents; therefore, larger positions have proportionately greater influence on the fund’s aggregate sales yield. The reciprocal can also be expressed as price/sales.

Standard deviation is a statistical measure of the historical volatility of a mutual fund or portfolio, usually computed using 36 monthly returns.