"Don't focus so much on projections. Do your analytical work to understand what you really have [now]," Peterson said. "It's a financial version of the Socratic 'Know thyself.' "
Share price data
The chart includes basic information on stock-related items, including the share price on April 17 and the performance of the stock over the last year.
The "market cap" column indicates each company's relative market capitalization, or share prices times the number of shares outstanding.
An "L" designates a large-capitalization stock, "M" a mid-cap stock and "S" a small-cap stock. Large-cap companies are those whose market value tops $2 billion; mid-cap, those between $750 million and $2 billion; and small-cap, $750 million or less.
Market cap simply tells you how a company's business is valued by Wall Street.
We've also included the "float" of each company. Float is the number of shares outstanding that are not held by insiders, such as the family that founded a company. In other words, it's the total number of shares available to trade in the open market.
The size of the float can be important: If relatively few shares trade, it's likely that the actions of just a handful of big investors, such as mutual funds, could have an outsized impact on the stock.
If a company reports good news, funds buying the stock could drive up the price dramatically when float is thin. Unfortunately, the principle also holds true if there's negative news and big players head for the exits.
Valuation
One of the better-known stock terms is price-to-earnings ratio, or P/E. It measures the price of a share of stock divided by its annualized earnings per share. That gives investors a sense of how pricey one stock is in relation to another.
The chart shows each stock's P/E ratio as of April 17, measuring price against the most recent four quarters' earnings per share.
Seven years into a bull market, it's not surprising that many stocks' P/Es are at all-time highs. But how high is too high for a P/E? There is no single answer.
The average blue-chip stock's P/E is about 28 today. Typically, companies whose earnings growth is expected to be above average in coming years will sport above-average P/Es. Companies expected to be slower growers, or in businesses that tend to be highly cyclical, will have lower P/Es.
A company's P/E also may be high because earnings have been depressed by one-time charges.
One way of assessing a stock's relative height is to look at the "short interest." When an investor sells short a company's stock, he or she usually is betting the price will fall.
Here's the way it works: The investor borrows shares from a brokerage and sells them in the open market. The bet is that the lent shares can be replaced at some point in the future at a cheaper price.
The chart shows the short interest in each stock--that is, the percentage of the stock float that has been sold short.
Theoretically, when a stock shows a big short-interest position, it's a sign that many investors are bearish on the stock. Bullish investors take that as a warning to double-check their homework on a company. Perhaps they've missed something that could hurt the stock, such as a competitor coming out with a new product.
"One of the first things a young man on my staff does [every month] is take down changes in that activity," Peterson said. "Where there's a big change in the [short] interest, [an investor] should feel that something's up. . . . You don't know what you have, but it's a red flag."
Sometimes, though, rising short interest can be a positive. If the bad news expected by short sellers never materializes, the stock could rise--saddling short sellers with losses on their trades. A "short squeeze" may then occur: To prevent losing more money, some short sellers will unwind their transactions, quickly buying shares to replace the ones they borrowed. That buying can cause the stock to go even higher.
Yet some investors dismiss short interest altogether. It's become a less useful indicator in recent years, they say, because of various hedging strategies used on Wall Street.
Some professionals use arbitrage techniques in which they go "long" on a basket of stock index futures while shorting the individual securities in the basket, for example. That leads to distortions that don't help individual investors assess sentiment toward their stocks, analysts say.
Financials
To judge the financial health of a company, analysts look at a number of items on the company's income statement and balance sheet. Here's an introduction to some of them:
* One-year inventory turnover: This is the ratio of a company's cost of goods sold (found on the income statement) to average inventory (which can be calculated from the balance sheet). It shows how quickly a company is selling its inventory of goods produced during the year.
The chart shows each company's most recent one-year turnover, along with its industry's average.
