Stock market terms, in plain English
The words that come up when a stock moves, explained in a sentence or two. In our articles, these terms link here.
- After-hours trading
- Trading that happens after the main US market closes at 4 p.m. Eastern time. Many companies report results then, so big moves often start after hours. Also called: after-hours, after hours, extended trading, extended-hours trading.
- Backlog
- Orders a company has already won but not yet delivered or been paid for. A growing backlog usually means more sales are on the way. Also called: order backlog, backlogs.
- Capex
- Money a company spends on long-lasting things like buildings, data centers, factories and equipment. It's an investment in the future, so it doesn't show up as a normal cost all at once. Also called: capital spending, capital expenditures, capital expenditure, capex spending.
- Credit default swap
- A kind of insurance contract against a company failing to repay its debt. When its price rises, traders think the risk of that company not paying its debts has gone up. Also called: credit default swaps, CDS.
- Dilution
- When a company creates and sells new shares, each existing share owns a smaller slice of the company. That shrinking of everyone's slice is called dilution. Also called: share dilution, dilutive, diluted.
- Forward P/E
- The share price divided by the profit per share analysts expect over the next 12 months. It shows how many years of expected profit investors are paying for. Also called: forward price-to-earnings, forward price-to-earnings ratio, forward P/E ratio, price-to-earnings on next 12 months' earnings, times next year's expected profit, times next year's expected profits, times forward earnings, forward earnings multiple.
- Free cash flow
- The cash a company has left after paying for its day-to-day business and its capex. It's the money it could use to pay dividends, buy back shares or pay down debt. Also called: FCF.
- Guidance
- A company's own forecast of its future results, such as next quarter's sales or this year's spending. Stocks often move more on guidance than on past results. Also called: financial guidance, sales guidance.
- Hazard ratio
- A number from medical trials that compares how often something bad happens, like a cancer coming back, in patients who got a treatment versus those who didn't. A hazard ratio of 0.58 means about 42% lower risk.
- Intraday
- During the trading day, as opposed to at the close. An intraday low is the lowest price a stock hit at any moment that day. Also called: intraday low, intraday high.
- Market cap
- What the stock market says a whole company is worth: the share price times the number of shares. If the price falls 10%, the market cap falls 10% too. Also called: market capitalization, market value.
- Operating cash flow
- The cash a company's normal business actually brings in during a period, after paying its everyday bills. Also called: cash from operations, operating cash.
- Overall survival
- In a medical trial, how long patients live, from any cause, after starting treatment. It's the gold-standard measure of whether a cancer drug truly helps.
- Phase 3 trial
- The last and largest stage of testing a new drug or vaccine in people, usually with hundreds or thousands of patients. Good Phase 3 results are normally needed before regulators approve it. Also called: Phase 3, Phase III, Phase III trial, late-stage trial.
- Price target
- The price an analyst thinks a stock will reach, usually within 12 months. It's an opinion, not a promise, and analysts often disagree. Also called: price targets, analyst price target.
- Short interest
- The number of a company's shares that investors have borrowed and sold, betting the price will fall. High short interest means many people expect a drop. Also called: short sellers.
- Spin-off
- When a company splits off part of its business into a separate company with its own shares, usually handed to existing shareholders. Also called: spinoff, spun off, spin off.
- Sympathy move
- When a stock rises or falls because of news about a different company, usually a customer, supplier or rival, even though it had no news of its own. Also called: sympathy moves, sympathy selling, moved in sympathy.
- Valuation
- How expensive a stock is compared with what the company earns or might earn. A common measure is the price-to-earnings (P/E) ratio: the share price divided by yearly earnings per share. Also called: price-to-earnings ratio, price/earnings ratio, P/E ratio, P/E.