Investment Glossary

Edison Investment Research is an independent, issuer-paid equity research firm covering mostly UK and European small- and mid-cap companies across Healthcare, Technology, Energy & Resources, Financials, Industrials, Consumer, Investment Companies, Metals & Mining and Real Estate. This glossary defines the equity research, valuation and sector terms that recur in Edison’s coverage, and shows how Edison’s analysts use each one. Edison publishes valuation, forecast and mechanism analysis only (not buy, sell or hold recommendations), so every entry explains how a term works, never whether to trade on it. Each entry answers a “What is X?” question. The plain-English definition comes first, then a line tying the term to the sector and the Edison method where it applies. The longer, worked entries sit on the niche, sector-specific terms: rNPV, AISC, life of mine, EPRA NTA, the discount control mechanism, NAV total return. Those are the areas where Edison’s analysts work first-hand and a generic glossary cannot compete.

2P Reserves

Energy & Resources

What are 2P reserves in oil and gas? 2P reserves are the sum of a field’s Proved (1P) and Probable reserves: the volumes judged at least 50% likely to be recovered under current conditions. They are the figure most often used to gauge what an oil and gas company can realistically produce and sell. Edison’s Energy & Resources models take 2P reserves as the production and cash-flow basis, and keep them apart from the larger, lower-confidence 3P (Possible) and contingent resources, which should not be valued on the same terms.

Adjusted EBITDA

Cross-Sector

What is adjusted EBITDA? Adjusted EBITDA is EBITDA after stripping out items a company treats as non-recurring, exceptional or unrepresentative of underlying performance. The adjustment can make operating performance easier to compare across periods or peers, but the add-backs deserve scrutiny: aggressive ones flatter profitability. Edison shows reported and adjusted figures side by side, and states which adjustments it accepts when building its forecasts.

All-In Sustaining Cost (AISC)

Metals & Mining

What is All-In Sustaining Cost (AISC)? AISC is the total cash cost of producing and selling an ounce of gold or another precious metal: direct mining, royalties, sustaining capital expenditure and overheads. Set against the spot price, it shows the cash margin per ounce. A miner with AISC of $1,100/oz, when gold trades at $1,900/oz, earns roughly $800/oz. Across its Metals & Mining coverage, Edison uses AISC to rank producers on cost position and to model how margins move with the gold price.

ARR (Annual Recurring Revenue)

Technology

What is ARR? ARR (Annual Recurring Revenue) is the annualised value of a software company’s active subscription contracts: monthly recurring revenue × 12. It captures the scale and momentum of a subscription business, and in early-stage software the ARR growth rate often carries more valuation weight than the absolute figure or current profit. Edison’s analysts read ARR next to net revenue retention, churn, gross margin and cash burn to judge whether the growth will last, valuing SaaS names on ARR multiples rather than P/E.

Asset Allocation

Investment Companies

What is asset allocation in an investment trust? Asset allocation is how a fund splits its capital across asset classes such as equities, bonds, property, cash and alternatives. That split usually drives more of the long-term return than individual stock selection does. Edison’s investment trust research explains each trust’s allocation as part of the investment case, so investors can see the risk exposure they are actually taking on.

Average Transaction Value (ATV)

Consumer

What is Average Transaction Value (ATV)? ATV is the average amount a customer spends per purchase: total revenue divided by the number of transactions. A rising ATV usually means customers are buying higher-priced products, or more items per visit. A falling ATV can point to trading down or smaller baskets. In its Consumer coverage, Edison pairs ATV with like-for-like growth and volume data to tell price-led revenue change from volume-led.

Bankable Feasibility Study (BFS)

Metals & Mining

What is a Bankable Feasibility Study (BFS)? A BFS is the detailed engineering and financial study a mining developer completes before committing to build a mine. Its cost estimates are accurate to roughly ±15%, the level banks require before they will provide project finance. Completing one changes a project’s risk profile: before the BFS it carries heavy technical and funding uncertainty; after it, the project is financeable. When assessing Metals & Mining and Energy projects, Edison tracks where each developer sits in this sequence.

Beta

Cross-Sector

What is beta in investing? Beta measures how sensitively a share price moves relative to the wider market. A beta of 1 means the share has historically moved broadly in line with the market; above 1 implies greater sensitivity, below 1 implies less. It captures market-related volatility, but not company-specific risk. Beta enters Edison’s work mainly through the cost of equity in its DCF-based valuations.

Bid-Ask Spread

Cross-Sector

What is the bid-ask spread? The bid-ask spread is the gap between the highest price a buyer will pay and the lowest a seller will accept for a security. A wide spread signals lower liquidity and higher round-trip trading costs. It bites hardest in the micro- and small-caps that make up most of Edison’s coverage, where thin free float can leave spreads of several percent, enough to erode a position before the thesis has had a chance to play out. In thinly traded names the spread is part of the real cost of acting on a valuation, so Edison flags liquidity and free-float constraints in its research.

Bond / Corporate Bond

Cross-Sector

What is a corporate bond? A corporate bond is a loan from investors to a company, in return for regular interest (the coupon) and repayment of the principal at maturity. Bondholders get no ownership, unlike shareholders, but they rank ahead of shareholders if the company fails. Issuing bonds adds a fixed interest cost the company has to meet whatever its performance. Edison assesses how that issuance affects leverage, interest cover and refinancing risk across its coverage.

Bookings

Technology

What are bookings in software companies? Bookings are the total value of customer contracts signed in a period, whether or not the revenue has been recognised yet. In software and subscription businesses they can be a useful leading indicator of future revenue, though they are not the same as ARR, recognised revenue or cash received. In its Technology coverage, Edison reads bookings with deferred revenue and ARR to gauge how much forward revenue is already visible.

Burn Rate

Healthcare & Technology

What is burn rate? Burn rate is the pace at which a company consumes cash, usually measured per month or per quarter. It matters most for pre-revenue healthcare, biotech and technology companies that fund development before they earn anything. A faster burn shortens the cash runway and raises the odds of another fundraising, and of the dilution that can come with it. For the pre-revenue companies it covers, Edison models burn rate and runway as core risk indicators.

Broker / Stockbroker

Cross-Sector

What is a stockbroker? A stockbroker is a firm authorised to buy and sell shares on investors’ behalf; retail investors mostly use execution-only online platforms. Separately, a listed company appoints a corporate broker to manage relationships with institutional investors and advise on capital markets activity. Edison’s independent research is a different function again: it involves no dealing and no corporate finance.

CAGR (Compound Annual Growth Rate)

Cross-Sector

What is CAGR? CAGR (compound annual growth rate) is the single average annual rate at which a metric such as revenue, earnings or NAV grows over several years, smoothing out the year-to-year swings. A 10% revenue CAGR over five years means growth averaged 10% a year. Edison’s analysts present revenue, earnings and NAV growth as a CAGR across all sectors. One thing to check is the base year: a low starting point can flatter the figure.

Capital Allocation

Cross-Sector

What is capital allocation? Capital allocation is what management does with the cash a business generates: reinvest for growth, buy other companies, pay down debt, pay dividends or buy back shares. Disciplined allocation compounds value over time; weak allocation erodes it, even in an otherwise sound business. Edison’s initiation and update notes assess each company’s capital-allocation track record.

Capital Expenditure (Capex)

Industrials

What is capital expenditure (capex)? Capex is money spent on long-term physical assets such as buildings, machinery, mines or infrastructure. Unlike operating costs, it is capitalised and depreciated over time rather than expensed at once, and it comes out of operating cash flow to leave free cash flow. When modelling FCF and whether dividends or debt repayments are sustainable, Edison’s analysts split maintenance capex from growth capex. They take particular care in capital-intensive sectors such as Energy, Industrials, Mining and Real Estate, where the move from build-phase to maintenance capex is often a turning point.

Catalyst

Cross-Sector

What is an investment catalyst? A catalyst is a specific event that can change how investors value a company: results, a regulatory decision, a contract win, a product launch or a corporate action. They matter because an undervalued or overlooked company often needs a clear trigger before the market re-rates it. Every Edison investment thesis names its catalysts, and flash or update notes follow when they happen.

Cash Runway

Healthcare & Technology

What is cash runway? Cash runway is how long a company can keep operating before it needs new funding, taken from its current cash balance and burn rate (cash balance ÷ average cash burn). For pre-revenue healthcare, biotech and technology companies it is one of the most important risk indicators: run short, and the company is forced to raise money on whatever terms it can get. For the pre-revenue names it covers, Edison reports the runway and the likely timing of any funding need.

Churn Rate

Technology

What is churn rate? Churn rate is the share of customers, or of recurring revenue, that a subscription business loses in a period; 10% annual churn means one customer in ten did not renew. It is the counterweight to winning new customers: a business losing them faster than it adds them is shrinking, even if headline revenue still grows. In its Technology coverage, Edison weighs churn against net revenue retention and CAC when judging the quality of software growth.

CHMP Opinion

Healthcare

What is a CHMP opinion? A CHMP opinion is the recommendation from the European Medicines Agency’s Committee for Medicinal Products for Human Use on whether a medicine should be granted EU marketing authorisation. It is not the final approval (the European Commission makes that decision), but it is the key signal that approval is likely, and the Commission follows it in the large majority of cases. In its Healthcare coverage, Edison treats a CHMP opinion as a defined valuation catalyst, and adjusts the probability of success and timing in its rNPV models.

Clinical Trial Phases (1, 2 and 3)

Healthcare

What are the phases of clinical trials? Clinical trials run through Phase 1 (mainly safety, in a small group), Phase 2 (efficacy and dosing in a larger group) and Phase 3 (a pivotal trial built to support regulatory approval). Success rates vary a lot by therapy area, trial design and data quality, so any broad probability figure is directional rather than fixed. When valuing a pipeline with rNPV, Edison maps each drug to its phase and attaches a stage-specific probability of success.

Comparable Company Analysis

Cross-Sector

What is comparable company analysis? Comparable company analysis values a business against how similar listed companies are priced right now. If peers trade at 10× EBITDA, that becomes a reference point for the company being assessed. Edison’s peer-comparison tables, set out in its initiation and update notes, show where a company trades relative to its peers, and explain whether any discount or premium is justified by differences in growth, margin or risk.

Consensus Estimates

Cross-Sector

What are consensus estimates? Consensus estimates are the average of analysts’ forecasts for a company’s future results, usually revenue, EBITDA, profit and EPS. Come in above consensus and it is a “beat”; below, a “miss”. Where Edison’s forecasts differ from consensus, it shows exactly where its assumptions part company with the wider market view, which is often where the real investment debate sits.

Continuation Vote

Investment Companies

What is a continuation vote in an investment trust? A continuation vote is a shareholder vote on whether an investment trust should carry on in its current form. Some are scheduled at set intervals; others are triggered when performance, a persistent discount or governance concerns become material. Either way, they give shareholders a defined pressure point over the board and manager. Edison’s investment trust research flags upcoming continuation votes and the conditions attached to them.

Convertible Bond

Cross-Sector

What is a convertible bond? A convertible bond is a loan to a company that can be converted into shares at a pre-agreed price. Holders get bond-like protection (fixed interest, and repayment ahead of shareholders) plus the option to convert if the shares rise. That conversion would dilute existing shareholders. Edison builds the potential dilution from outstanding convertibles into its per-share forecasts, and treats convertibles as the middle option between equity and debt when a company weighs how to fund itself.

Covenant

Cross-Sector

What is a debt covenant? A debt covenant is a condition in a loan agreement that a borrower has to keep to, for example a maximum leverage ratio or a minimum interest cover. Breach one and lenders can demand repayment, impose restrictions or force a refinancing. Covenant headroom is the gap between the current position and that breach threshold. When assessing balance-sheet risk in leveraged companies, Edison keeps an eye on covenant headroom.

Customer Acquisition Cost (CAC)

Technology

What is Customer Acquisition Cost (CAC)? CAC is the average cost of winning a new customer: sales and marketing spend divided by the number of new customers it brings in. In subscription businesses it is read with customer lifetime value, payback period, churn and retention to judge whether growth pays for itself. To test the unit economics of the software companies in its Technology coverage, Edison uses CAC and the LTV/CAC ratio.

DCF Valuation

Cross-Sector

What is a DCF valuation? A discounted cash flow (DCF) valuation estimates what a company is worth today from the cash it is expected to generate in future, discounted back to present value because money later is worth less than money now. The output is sensitive to its assumptions: growth, margins, terminal value and the discount rate (WACC). Every DCF-based valuation from Edison discloses its WACC and the key assumptions, with sensitivity analysis to show how the value responds when they change.

Deferred Revenue

Technology

What is deferred revenue? Deferred revenue is cash a company has already received for goods or services it has not yet delivered or booked as revenue; it sits as a liability on the balance sheet until earned. For software and subscription businesses, a growing deferred-revenue balance can point to good forward revenue visibility. To read the revenue pipeline of the technology companies it covers, Edison takes deferred revenue together with bookings and ARR.

Discount to NAV

Investment Companies

What is a discount to NAV in investment trusts? A discount to NAV means an investment trust (a closed-end fund) trades below the value of its underlying assets: a 10% discount prices £1.00 of assets at 90p. Discounts can reflect weak demand, market sentiment, doubts about the manager or strategy, or wider pressure on the sector. Alongside the portfolio’s fundamentals, Edison looks at each trust’s discount history, its Z-score and the catalysts that might narrow it.

Dividend Cover

Cross-Sector

What is dividend cover? Dividend cover measures how comfortably earnings or free cash flow pay for the dividend: earnings per share (or FCF per share) divided by dividend per share. Cover of 2× means earnings are twice the dividend; cover below 1× means the company is paying out more than it earns, which only works for a while. Investment trusts can lean on a revenue reserve to smooth payouts from year to year. Edison assesses dividend cover and sustainability for every covered company with an income component.

Diluted EPS

Cross-Sector

What is diluted EPS? Diluted EPS is earnings per share worked out as if all the potential new shares (from options, warrants, convertibles and similar instruments) had been issued. Where dilution is possible, it gives a more conservative per-share figure than basic EPS. Edison’s per-share forecasts take outstanding instruments into account, so investors can see what potential dilution would do.

Dividend Yield

Cross-Sector

What is dividend yield? Dividend yield is the annual dividend as a percentage of the share price (annual dividend per share ÷ share price × 100): a share paying 100p a year at £20 yields 5%. It measures the income return from holding the share. An unusually high yield is often a warning sign rather than a durable income opportunity: it usually reflects a falling share price that anticipates a dividend cut, so it should be read with dividend cover. Edison assesses dividend sustainability for all covered companies with an income component.

Discount Control Mechanism

Investment Companies

What is a discount control mechanism? A discount control mechanism (DCM) is a policy an investment trust board uses to manage the gap between share price and NAV, usually buying shares back when the discount widens and issuing them when demand is strong. It can hold a persistent discount in check, though only as far as the board is willing and able to act. As part of its discount analysis, Edison assesses each trust’s DCM, its track record and how much firepower it has left.

Drug Pipeline

Healthcare

What is a drug pipeline? A drug pipeline is the set of medicines a pharmaceutical or biotech company has in development, spread across stages from early research through clinical trials to regulatory approval. For the healthcare companies Edison covers, the pipeline is often worth more than current revenue. Edison’s models value each pipeline asset on its own, projecting its potential sales if approved and then adjusting for the probability of reaching the market, and sum the parts using rNPV.

Dividend Reserve

Investment Companies

What is a dividend reserve in an investment trust? A dividend reserve (or revenue reserve) is income a trust holds back in stronger years to support its dividend in weaker ones, smoothing payouts over time. It is one of the structural advantages closed-end funds have over open-ended funds when it comes to income. When weighing the income case for the trusts it covers, Edison reports the size of the revenue reserve and whether it is adequate.

EPRA Earnings

Real Estate

What are EPRA earnings? EPRA earnings are a European Public Real Estate Association measure of the recurring earnings from a property company’s core operations, stripping out valuation movements and other items that distort the underlying picture. They are used to gauge dividend capacity and operating profitability in listed property. When valuing the real estate companies it covers, Edison reads EPRA earnings alongside EPRA NTA and the standard REIT metrics.

Cross-Sector

What is earnings per share (EPS)? EPS is the profit attributable to each share: net profit divided by the number of shares in issue. When reported EPS beats or misses consensus forecasts, the share price usually moves on results day. Every Edison company research report publishes current-year and forward EPS forecasts, on a stated basis (reported or normalised).

Earnings Surprise

Cross-Sector

What is an earnings surprise? An earnings surprise is the gap between what analysts expected a company to report and what it actually reports: positive if results beat expectations, negative if they fall short. How the share price reacts depends on the size of the surprise, what caused it, and whether it changes the investment case. Edison’s update and flash notes set out whether a surprise alters its forecasts and thesis.

Earnings Upgrade / Downgrade

Cross-Sector

What is an earnings upgrade or downgrade? An earnings upgrade is an analyst raising their forecast for a company’s future profits, usually after better-than-expected results or improved guidance; a downgrade is the reverse. These revisions feed straight into valuation: if forecast EPS rises 10% and the P/E multiple holds, the implied share price rises about 10%. That is why markets can move sharply on results day. Edison publishes the revised forecasts, and the reasons behind them, in its update notes.

EBITDA

Cross-Sector

What is EBITDA? EBITDA (earnings before interest, taxes, depreciation and amortisation) measures operating profit before financing costs, tax and non-cash charges, which makes it handy for comparing companies with different debt levels. The EV/EBITDA multiple is one of the most widely used valuation ratios, especially for capital-intensive businesses. Edison uses EBITDA across its coverage, but warns that it ignores capital expenditure, so it should not be read as a stand-in for cash generation without adjustment.

EBITDA Margin

Cross-Sector

What is EBITDA margin? EBITDA margin is EBITDA as a percentage of revenue: a 25% margin means 25p of every £1 of revenue becomes EBITDA, before interest, tax, depreciation and amortisation. Investors use the margin and its trend to gauge operating efficiency and how well a business scales. Edison tracks margin trends across its coverage to test whether growth is turning into operating leverage.

Energy Transition

Energy & Resources

What is the energy transition? The energy transition is the global shift from fossil fuels to renewable and low-carbon energy (wind, solar, batteries and hydrogen), and the reshaping of the energy, industrial, materials and financial sectors around it. Critical transition metals such as lithium, copper and cobalt face structural demand growth. Edison covers both sides of the transition in its Energy & Resources and Metals & Mining research, and in its thematic work.

Enterprise Value (EV)

Cross-Sector

What is enterprise value (EV)? Enterprise value is the total value of a business across all its capital providers: market capitalisation plus total debt, minus cash. It is the basis for multiples such as EV/EBITDA and EV/Sales, which let investors compare companies with different financing structures on a like-for-like basis. EV-based multiples run right through Edison’s valuation work.

EPRA NTA

Real Estate

What is EPRA NTA? EPRA NTA (European Public Real Estate Association Net Tangible Assets) is the property sector’s standard measure of net asset value per share: the tangible value of a property company’s assets less liabilities, adjusted for items not treated as part of long-term property value. Investors use the price-to-EPRA NTA ratio to see whether a listed property company trades at a premium or discount to its asset base. Edison values the REITs and property companies it covers against EPRA NTA, alongside FFO and EPRA earnings.

ESG

Cross-Sector

What is ESG in investing? ESG stands for Environmental, Social and Governance: three sets of factors used to judge a company’s sustainability and risk beyond the financial statements. Governance is the one most directly tied to investment losses, through poor oversight or accounting failures, and many institutional investors now write formal ESG requirements into their mandates. Edison addresses material ESG factors where they affect the investment case, in both its coverage and its thematic work.

EV/EBITDA

Cross-Sector

What is EV/EBITDA? EV/EBITDA compares a company’s enterprise value with its EBITDA, adjusting for capital structure so companies with different debt levels can be set side by side. A lower multiple can look cheaper, but it has to be read against growth, margins, capital intensity, cyclicality and balance-sheet risk. In its peer-comparison tables, Edison uses EV/EBITDA and explains any discount or premium to peers.

EV/Sales

Technology

What is EV/Sales? EV/Sales compares enterprise value with annual revenue. It comes into its own for companies that are not yet profitable, especially in software and early-stage growth, where there are no earnings to anchor a P/E. A high EV/Sales multiple is usually justified only when revenue growth, retention, gross margin and a credible path to profitability back it up. For pre-profit names in its Technology coverage, Edison uses EV/Sales and cross-checks it against the SaaS quality metrics.

FFO (Funds from Operations)

Real Estate

What is FFO? Funds from operations (FFO) is the cash earnings measure used for REITs and property companies: reported profit with non-cash property depreciation added back, since most properties hold or gain value rather than wear out. FFO is the property sector’s equivalent of EPS, and the FFO payout ratio shows whether dividends come from genuine cash earnings or out of capital. In its Real Estate coverage, Edison uses FFO alongside EPRA earnings and EPRA NTA.

Flash Note

Cross-Sector

What is a flash note in equity research? A flash note is a short research note published within hours of a significant announcement: results, a contract win, a clinical-trial outcome or a management change. It gets straight to what happened, what it means for the investment case, and how the forecasts change. Edison emails its flash notes to subscribers the same day, giving investors an analyst’s read before the market has fully digested the news.

Free Float

Cross-Sector

What is free float? Free float is the proportion of a company’s shares available for public trading, leaving out stakes held by founders, strategic investors, governments or insiders. A low free float can thin out liquidity and add to share-price volatility, particularly in small-caps. In thinly traded names, these constraints shape the real cost of building or exiting a position, so Edison notes free-float and liquidity limits in its research.

Free Cash Flow (FCF)

Cross-Sector

What is free cash flow (FCF)? Free cash flow is the cash a company generates from operations after capital expenditure (operating cash flow minus capex). It is the money genuinely available for dividends, debt repayment, buybacks or acquisitions. Because it is harder to massage than reported earnings, it is a more reliable read on financial health: a company can post an accounting profit while burning cash if it is spending heavily on capital. Edison forecasts FCF for all covered companies, and flags FCF breakeven as a milestone for growth-stage businesses.

Gearing (Investment Trusts)

Investment Companies

What is gearing in an investment trust? Gearing is a trust borrowing to invest more than its own capital: a trust with £100m of assets that borrows £10m to invest £110m has 10% gearing. In rising markets that magnifies returns; in falling markets it magnifies losses by exactly the same logic. In its investment trust research, Edison reports each trust’s gearing level and policy, and feeds it into the risk profile and NAV sensitivity.

Going Concern

Cross-Sector

What is a going concern warning? A going concern assessment asks whether a company can keep operating for at least the next 12 months. When auditors flag material uncertainty over going concern, it can point to liquidity pressure, refinancing risk or dependence on new funding. For equity investors it is a serious risk indicator, since it can feed into valuation, covenant headroom and the risk of dilution. Edison reflects going-concern and funding risk in its risk sections and forecasts.

Gross Revenue Retention (GRR)

Technology

What is Gross Revenue Retention (GRR)? GRR measures how much recurring revenue a company keeps from its existing customers before any upsell. It leaves out expansion revenue, so it cannot exceed 100%. A high GRR shows customers are staying and continuing to pay, which makes it a cleaner quality signal than NRR for SaaS and subscription businesses. To tell genuine retention from growth flattered by upselling, Edison reads GRR with NRR and churn.

Goodwill and Impairment

Cross-Sector

What is goodwill, and what is an impairment? Goodwill is the amount an acquirer pays above the book value of a business it buys: the premium for brands, customers and future potential. An impairment writes that premium down when the acquired business falls short of what was assumed, in effect confirming the buyer overpaid. Large goodwill balances are tested every year. In its coverage of M&A-active companies, Edison reviews the acquisition record and flags impairment risk.

Capital Raising

Cross-Sector

What are the main ways a listed company raises capital? Listed companies raise capital through three main routes. Equity (new shares) dilutes existing holders but carries no repayment obligation, and is the usual route for early-stage and growth companies. Debt (bonds or bank loans) adds interest costs that have to be met whatever the performance, but leaves ownership intact. Convertible bonds sit between the two: debt that can convert into equity at a set price, putting off the dilution. The choice turns on how much debt a company already carries, the cost of each instrument and investor appetite. Edison’s research assesses which route a company is likely to take, and the dilution or leverage that comes with it.

Independent Equity Research

Cross-Sector

What is independent equity research? Independent equity research is company analysis produced with editorial and analytical independence from investment banking, corporate broking and trading. In an issuer-paid model the covered company may commission the research, but the analyst’s conclusions, forecasts, valuation and risk assessment stay independent, and the funding arrangement is clearly disclosed. Edison itself is an FCA-regulated independent research firm. Its analysts own every conclusion, and it publishes valuation and forecast analysis, not buy, sell or hold recommendations. This kind of research is most useful in the micro-, small- and mid-cap markets, where sell-side coverage is thin.

Initiation of Coverage

Cross-Sector

What is an initiation of coverage? An initiation of coverage is the first full research report an analyst publishes on a company. It usually introduces the business model, the market opportunity, the financial forecasts, the valuation method, the investment thesis and the key risks. For an undercovered micro- or small-cap, an Edison initiation can be the first structured research many investors have to work with. It sets out the framework that the later update and flash notes then track.

Interest Cover

Cross-Sector

What is interest cover? Interest cover is operating profit (EBIT) divided by the annual interest expense, showing how many times over earnings cover the interest bill. Cover of 3× means earnings are three times the interest payment; cover below about 1.5× leaves little headroom, and is often where lenders focus. Lenders frequently write interest cover into a loan covenant. It is one of the measures Edison uses to gauge balance-sheet resilience, especially in leveraged and cyclical companies.

Investment Thesis

Cross-Sector

What is an investment thesis? An investment thesis is the structured argument for why a company is worth analysing as an investment: why it may be undervalued or overlooked, what specific events could drive a re-rating, and what could go wrong. Every Edison research report is built around an explicit thesis, which the update and flash notes then confirm, strengthen or challenge as new information arrives.

Investment Trust

Investment Companies

What is an investment trust? An investment trust is a listed, closed-ended fund that pools investors’ money into a portfolio of assets. Because its shares trade on an exchange, supply and demand set the price, which can differ from the value of the underlying portfolio: a discount when the shares trade below NAV, a premium when above. In some markets the same structure is called a closed-end fund. Edison covers a range of investment trusts, looking at NAV performance, discount, gearing and charges.

IPO (Initial Public Offering)

Cross-Sector

What is an IPO? An initial public offering (IPO) is the first time a private company sells shares to the public and lists on a stock exchange. It raises new money, creates a tradeable share price and lets existing investors realise value. Many of the companies Edison covers, particularly in healthcare, technology and consumer, first listed through an IPO, often on London’s AIM market. Edison often initiates coverage in the period just after a listing.

IRR (Internal Rate of Return)

Cross-Sector

What is IRR? The internal rate of return (IRR) is the annualised return a project or investment is expected to deliver over its life: a mining project with a 20% IRR is expected to return the equivalent of 20% a year on the capital invested. IRR is the main return measure for mining and energy project economics in Edison’s coverage. An IRR above the sector hurdle rate (commonly 10–15%) clears the cost-of-capital threshold; one below it does not.

Life of Mine

Metals & Mining

What is life of mine? Life of mine is how many years a mine is expected to operate before its economically mineable ore runs out at the planned extraction rate. A longer life means more cash flow, more time to recover the capital invested and lower risk. In its Metals & Mining coverage, Edison checks a declared life of mine against the confirmed ore reserve base: a long life-of-mine claim resting on thin confirmed reserves is something it scrutinises closely.

Like-for-Like (LFL) Growth

Consumer

What is like-for-like (LFL) growth? Like-for-like growth is revenue growth from shops, restaurants or sites open at least a year, leaving out new openings. By taking out the expansion effect, it shows how the existing estate is really performing, which is the single most useful organic health metric for consumer businesses. Edison watches LFL closely in its Consumer coverage: total revenue rising on new openings while LFL falls points to weakness in the existing estate that headline growth can hide.

Loan-to-Value (LTV)

Real Estate

What is loan-to-value (LTV) in property investment? LTV is debt as a percentage of total asset value (total debt ÷ total asset value × 100). A property company with £500m of assets and £200m of debt has 40% LTV; if asset values fall 20%, LTV climbs to 50% and covenant headroom shrinks. Lenders set maximum LTV thresholds, and a breach can force asset sales or new equity. In its Real Estate coverage, Edison tracks LTV and headroom, mindful that falling valuations can move both quickly.

LTV/CAC Ratio

Technology

What is the LTV/CAC ratio? The LTV/CAC ratio compares the lifetime value of a customer with the cost of acquiring them. A higher ratio suggests customer acquisition pays off, as long as churn and payback periods stay manageable. In software investing it is read with retention, gross margin and cash burn rather than on its own. To test whether the software companies it covers are buying growth profitably, Edison uses the LTV/CAC ratio.

M&A (Mergers and Acquisitions)

Cross-Sector

What is M&A? M&A (mergers and acquisitions) covers deals where companies combine or one buys another. It can create value by cutting costs or speeding up growth, and destroy it through overpayment or botched integration. Edison’s initiation and update notes assess each company’s M&A record, since companies that keep overpaying for acquisitions erode shareholder value over time.

Market Capitalisation

Cross-Sector

What is market capitalisation? Market capitalisation is a company’s total equity value on the stock market: share price × shares in issue. It is the standard way to size a company and to band it as micro-, small-, mid- or large-cap. Edison focuses mainly on micro-, small- and mid-cap companies, where research coverage is often thin and independent analysis can add the most for investors.

Micro-Cap

Cross-Sector

What is a micro-cap company? A micro-cap is a small listed company at the lower end of the market by value. There is no single official threshold; in line with the bands on Edison’s own market-cap filter, the term is used here for companies below roughly $100m. Micro-caps tend to have limited liquidity, little or no analyst coverage and higher volatility. That can throw up under-researched opportunities, but it also raises funding, governance, liquidity and execution risk. Many companies in this band sit in Edison’s coverage, where independent research is scarcest.

Mineral Resource vs Ore Reserve

Metals & Mining

What is the difference between a mineral resource and an ore reserve? A mineral resource is mineralised ground with reasonable prospects for eventual extraction, classified by confidence as Inferred, Indicated or Measured. An ore reserve is the subset shown to be economically mineable once all costs and modifying factors are applied. Only reserves can support mine financing: every reserve is a resource, but not every resource becomes a reserve. Edison anchors its Metals & Mining valuations on confirmed reserves, and treats resources as lower-confidence optionality.

Mining Investment Cycle

Metals & Mining

What are the stages of the mining investment cycle? The mining investment cycle is the sequence a project moves through from discovery to mine closure. A project typically runs from exploration → scoping study / PEA (±35–50% cost accuracy) → pre-feasibility study / PFS (±25%) → bankable feasibility study / BFS (±15%) → construction → production. Each stage cuts technical risk and changes how the market values the company. Edison’s research places each developer on this curve, which frames the risk and the next re-rating catalyst.

NAV Total Return

Investment Companies

What is NAV total return? NAV total return measures the actual performance of an investment trust’s portfolio: the growth in NAV plus dividends paid, assuming reinvestment at NAV. It strips out moves in the discount or premium, which reflect market sentiment rather than the manager, to show what the portfolio itself delivered. For every trust it covers, Edison presents NAV total return, next to share-price total return, as the main benchmark of manager performance.

Net Asset Value (NAV)

Investment Companies & Real Estate

What is Net Asset Value (NAV)? NAV is the value of an investment company’s or property vehicle’s assets minus its liabilities, usually shown per share: (total assets − total liabilities) ÷ shares in issue. A share price below NAV is a discount; above NAV, a premium. NAV total return, which is NAV growth plus reinvested dividends, is the standard performance measure for trusts. Across its Investment Companies and Real Estate coverage, Edison reports NAV, the discount or premium, and NAV total return.

Net Debt

Cross-Sector

What is net debt? Net debt is a company’s total borrowings minus its cash and cash equivalents: a company with £200m of borrowings and £80m of cash has net debt of £120m. It is a clearer gauge of leverage than gross debt, and feeds ratios such as net debt/EBITDA. It is one of the measures Edison uses to assess leverage, refinancing risk and balance-sheet flexibility across its coverage.

Net Initial Yield

Real Estate

What is net initial yield in real estate? Net initial yield sets a property’s net rental income against its market value (including purchase costs), expressing the income return as a percentage. Rising yields can signal falling valuations, higher perceived risk or shifting interest-rate expectations. When assessing the property companies it covers, Edison reads net initial yield alongside EPRA NTA, LTV and occupancy.

Net Debt / EBITDA

Cross-Sector

What is the net debt / EBITDA ratio? Net debt/EBITDA is a leverage ratio showing how many years of current operating profit it would take to repay net debt. A ratio of 2× means net debt equals two years of EBITDA, usually seen as manageable; above about 3× it draws closer scrutiny from lenders. Lenders often write the ratio into loan covenants, where breaching the threshold can trigger early repayment. It is one of the ratios Edison tracks to assess balance-sheet risk across leveraged companies.

Net Revenue Retention (NRR)

Technology

What is Net Revenue Retention (NRR)? NRR measures whether a software company’s existing customers spend more or less over time, counting upgrades and expansions and netting off any who leave. NRR above 100% means existing customers together spend more than they did a year earlier, so the business grows even without adding new customers. That is one of the strongest signals of SaaS quality. To check the growth is genuine and not flattered by a few large upsells, Edison reads NRR with gross retention and churn.

Net Zero

Energy & Resources

What does net zero mean for companies and investors? Net zero means a company’s greenhouse-gas emissions are balanced by an equivalent amount removed or offset, so it adds nothing net to atmospheric carbon; net zero by 2050 is the Paris Agreement target. For investors, net-zero strategies bear on capital allocation, regulatory risk and the long-term viability of business models across energy, industrials and resources. Edison addresses net-zero exposure where it is material to the investment case in those sectors.

Normalised Earnings

Cross-Sector

What are normalised earnings? Normalised earnings are profits adjusted to strip out one-off, exceptional or non-cash items that distort underlying performance; common adjustments include acquisition-related amortisation, restructuring charges and share-based payments. They help investors gauge repeatable profitability, though the adjustments are worth reviewing, because they can flatter the picture. Edison states the basis of its normalised figures, so investors can see which items have been excluded.

Ongoing Charges Figure (OCF)

Investment Companies

What is the Ongoing Charges Figure (OCF) for an investment trust? The OCF is the annual cost of running an investment trust as a percentage of net assets, usually covering management, administration, custody, audit and director costs. An OCF of 0.5% on a £100,000 holding is £500 a year, before any performance effect. Charges are best weighed against strategy, performance, risk and comparable trusts, not looked at in isolation. In its investment trust research, Edison reports the OCF and assesses value for money.

Order Book / Backlog

Industrials

What is an order book or backlog? An order book (or backlog) is the total value of orders and contracts a company has won but not yet delivered. A large, growing backlog means future revenue is already secured, which lowers the risk of an earnings disappointment. Backlog analysis is central to Edison’s Industrials research: companies with multi-year contracted backlogs carry far lower near-term earnings risk than those that have to win new orders every period.

Occupancy Rate

Real Estate

What is occupancy rate in property investment? Occupancy rate is the percentage of a portfolio’s rentable space that is let: 95% occupancy means 95% is occupied and producing rent. High occupancy supports rental income and dividend capacity; falling occupancy can signal weakening demand or asset-quality problems. When assessing the property companies it covers, Edison reads occupancy alongside WAULT, net initial yield and the EPRA metrics.

Operating Leverage

Cross-Sector

What is operating leverage? Operating leverage describes how a change in revenue flows through to operating profit. A business with high fixed costs can see profit rise quickly as revenue grows, and fall just as quickly when revenue drops. Edison assesses operating leverage to gauge earnings sensitivity and how well a business scales, which matters most for the capital-intensive and early-scale companies it covers.

Operating Margin

Cross-Sector

What is operating margin? Operating margin is operating profit as a percentage of revenue (operating profit ÷ revenue × 100), showing how efficiently a company turns revenue into profit before financing and tax. Margin expansion can reflect better pricing, cost control or scale; margin compression points the other way. Edison tracks operating margin and its trend across its coverage to test whether scale is improving profitability.

Orphan Drug Designation

Healthcare

What is orphan drug designation? Orphan drug designation is a regulatory status for medicines developed for rare diseases. It can bring benefits such as a period of market exclusivity, fee reductions and regulatory support, which can make a niche therapy more commercially attractive, though it does not guarantee approval. In its rNPV valuations of biotech pipelines, Edison reflects orphan status in the addressable-market, pricing and probability-of-success assumptions.

Placing

Cross-Sector

What is a placing? A placing raises new money quickly by issuing new shares to selected (usually institutional) investors, typically at a small discount to the market price. It is faster and cheaper than a full rights issue, but it does not give every existing shareholder the chance to take part, so it can dilute those left out. When a covered company announces a placing, Edison publishes a flash note on the discount, the amount raised and the use of proceeds.

Peer Group

Cross-Sector

What is a peer group in equity research? A peer group is the set of comparable companies used to benchmark valuation, performance or operating metrics. A good peer group matches business model, growth, margins, geography and risk; a poorly chosen one can make a company look artificially cheap or dear. In its comparable-company tables, Edison builds and explains a defined peer group, and sets out why a company trades at a discount or premium to it.

Performance Fee

Investment Companies

What is a performance fee in an investment trust? A performance fee is an extra fee paid to a manager when returns beat a stated benchmark or hurdle. Investors should check the benchmark, any high-water mark, the calculation period and whether the structure really ties the manager’s reward to shareholders’ returns. When assessing value for money in its investment trust research, Edison sets out the fee structure, including any performance fee.

Portfolio Turnover

Investment Companies

What is portfolio turnover in an investment trust? Portfolio turnover measures how much a manager buys and sells in a year, as a percentage of the fund’s assets. High turnover means frequent changes; low turnover points to a long-term hold approach. It matters because trading costs money, and every transaction chips away at net returns. When weighing the cost and consistency of a trust it covers, Edison looks at turnover alongside charges and strategy.

Payback Period

Technology

What is payback period in SaaS? Payback period is how long it takes to recover the cost of acquiring a customer, usually out of the gross profit that customer generates. Shorter paybacks point to more efficient growth and less strain on funding. It is read with CAC, LTV/CAC, churn and NRR rather than on its own. To judge how efficiently the software companies it covers turn acquisition spend into lasting revenue, Edison uses the payback period.

Pre-Revenue Company

Healthcare

What is a pre-revenue company? A pre-revenue company has not yet generated meaningful commercial income, usually because its drug or device is still in clinical trials or awaiting approval. These companies are valued on future potential rather than current earnings, which makes cash runway (how long it can operate before it needs more funding) the metric that matters most. Edison’s models value pre-revenue healthcare names with rNPV, and track runway and funding needs as the central risks.

Pivotal Trial

Healthcare

What is a pivotal trial? A pivotal trial is the clinical study designed to provide the main evidence for regulatory approval. It is usually larger and more rigorous than earlier trials, and typically tests the treatment against placebo or standard of care (often a Phase 3, though a strong Phase 2 can be pivotal). Its result can be a major valuation catalyst for a biotech. In its Healthcare coverage, Edison treats pivotal-trial readouts as defined catalysts, and updates probability of success and rNPV when the data emerge.

Premium to NAV

Investment Companies

What is a premium to NAV? A premium to NAV is when an investment trust’s share price sits above the value of its underlying assets per share: if NAV is £1.00 and the shares trade at £1.10, that is a 10% premium. Premiums can reflect strong demand, confidence in the manager, or scarce access to a particular asset class. Edison analyses premium and discount history together, since a trust on a persistent premium can issue shares, just as one on a discount may buy them back.

Price-to-Book (P/B)

Cross-Sector

What is price-to-book ratio (P/B)? P/B is the share price divided by book value (net assets) per share. A P/B below 1× means the market values the company at less than its stated net assets. It is most useful for asset-heavy businesses whose balance-sheet values track economic reality: banks and financials (read with return on equity), property companies (where EPRA NTA is the equivalent) and investment trusts (where NAV per share plays the same role). It means much less for asset-light software and services firms. Edison turns to P/B where the balance sheet is the right anchor.

Price-to-Earnings Ratio (P/E)

Cross-Sector

What is the price-to-earnings (P/E) ratio? The P/E ratio compares a share price with earnings per share: a share at £50 with EPS of £5 trades on a P/E of 10× (investors pay £10 for every £1 of annual earnings). A forward P/E uses next year’s forecast earnings. A high P/E reflects growth expectations; a low one may point to undervaluation, or to doubts about earnings. In its valuation work, Edison reports current and forward P/E, read alongside growth and the other multiples.

Probability of Success (PoS)

Healthcare

What is probability of success in biotech investing? Probability of success (PoS) is the estimated likelihood that a drug in development eventually reaches the market and gains approval. On industry data, roughly one in ten drugs entering human trials is approved in the end, and the figure rises as a drug advances through the phases. PoS is the input that keeps healthcare valuations honest: value a pipeline at full projected peak sales without it, and you greatly overstate today’s worth. Edison applies a stage-specific PoS to every asset in its rNPV models.

Profit Warning

Cross-Sector

What is a profit warning? A profit warning is an announcement that a company’s upcoming results will be materially worse than previously guided or than analysts expect; under market rules, listed companies have to release this information promptly. A first profit warning is often followed by more, a pattern sometimes called “profit warning syndrome”. When one lands, Edison publishes a flash note on what it means for its forecasts and the investment thesis.

Recurring Revenue

Cross-Sector

What is recurring revenue? Recurring revenue repeats each period, from subscriptions, long-term service contracts or maintenance, rather than having to be won afresh each time. It is more predictable than one-off revenue, and the market values it more highly, which supports higher multiples. Across sectors, Edison reports the share and trend of recurring revenue, and reads a rising recurring share as a quality signal in business models from software to industrials.

Related: ARR · NRR · GRR · Deferred Revenue · Order Book / Backlog · Boku

Regulatory Approval

Healthcare

What is regulatory approval, and why does it matter for investors? Regulatory approval is authorisation from a health authority (such as the FDA, EMA or MHRA) to market and sell a drug or medical product. It usually marks the end of clinical development and the move from pre-revenue to commercial stage. Decision deadlines such as the FDA’s PDUFA date are watched closely, because approval, rejection or delay can move a valuation sharply. Edison models approval timing and probability into the rNPV of the pipelines it covers.

REIT

Real Estate

What is a REIT and how is it different from other property investments? A REIT (Real Estate Investment Trust) is a listed property company that owns income-producing real estate and must pay most of its rental income out to shareholders, usually in return for tax advantages. Rules vary by jurisdiction, but the structure gives investors liquid, stock-market access to property income. In its Real Estate coverage, Edison assesses REITs on NAV and EPRA NTA, LTV, occupancy, WAULT, dividend yield and interest cover.

Return on Capital Employed (ROCE)

Cross-Sector

What is Return on Capital Employed (ROCE)? ROCE measures how efficiently a company turns the capital it uses into operating profit: EBIT ÷ capital employed × 100. ROCE above the cost of capital means the business is creating value; below it, the business is destroying value. To compare capital efficiency across capital-intensive sectors such as Industrials, Energy and Consumer, Edison uses ROCE.

Rights Issue

Cross-Sector

What is a rights issue? A rights issue raises money by offering all existing shareholders the right to buy new shares at a discount, in proportion to their current holding. Unlike a placing, it lets every shareholder keep their stake by taking part; those who decline can usually sell their “nil-paid” rights on the market, and those who do neither end up diluted. Edison’s coverage assesses the size, discount, use of proceeds and dilution effect of a rights issue.

rNPV (Biotech Valuation)

Healthcare

Why do analysts use rNPV to value biotech companies? Standard multiples such as P/E and EV/EBITDA need earnings, which pre-revenue biotechs do not have. rNPV (risk-adjusted net present value) values each drug on its own: project its future revenues, multiply by the probability of reaching the market at its clinical stage, then discount back to today. The company’s value is the sum across the pipeline, net of costs and cash. rNPV is Edison’s core Healthcare valuation method, and it discloses the peak-sales, probability-of-success and discount-rate assumptions behind each asset.

Rule of 40

Technology

What is the Rule of 40? The Rule of 40 is a software-sector benchmark that adds a company’s annual revenue growth rate to its EBITDA (or FCF) margin; a total of 40 or more is read as a sign it is balancing growth and profitability. It is useful shorthand, but no substitute for digging into ARR quality, retention, cash burn, market size and valuation. In its Technology coverage, Edison uses the Rule of 40 as one screen among several.

Related: ARR · NRR · EBITDA Margin · EV/Sales · Churn Rate · Technology research · Boku

SaaS (Software as a Service)

Technology

What is SaaS? SaaS (software as a service) is a model where customers pay recurring subscription fees instead of buying a one-off licence; revenue is predictable and compounds as customers renew and expand. SaaS companies are usually valued on ARR multiples rather than P/E, since current profits tend to be reinvested in growth. Edison values the SaaS companies it covers on ARR, and on the retention, churn and unit-economics metrics that show whether that growth will last.

Related: ARR · NRR · GRR · Churn Rate · Rule of 40 · Recurring Revenue · EV/Sales · Technology research · Boku

Sector Rotation

Cross-Sector

What is sector rotation? Sector rotation is the movement of investor money between parts of the market, for example out of defensive sectors such as healthcare and into cyclicals such as energy, driven by changing economic conditions or interest-rate expectations. It can make a company’s shares look cheap or dear for reasons that have nothing to do with the business itself. Edison’s research helps investors tell a sector-driven price move from a real change in a company’s prospects.

Related: Beta · Catalyst · Investment Thesis

Sensitivity Analysis

Cross-Sector

What is sensitivity analysis in valuation? Sensitivity analysis shows how a valuation changes as the key assumptions move: WACC, growth, margins, commodity prices or probability of success. It reveals which assumptions matter most, and where the valuation risk is concentrated. Around its DCF and rNPV valuations, Edison publishes sensitivity analysis so investors can see how the output responds to the inputs that drive it.

Cross-Sector

What is a share buyback? A share buyback is a company using cash to buy its own shares in the market, cutting the number in issue. For an investment trust, buying back shares at a discount to NAV is immediately accretive (acquiring £1 of assets for less than £1) and is a key tool for managing the discount. Edison assesses the rationale, valuation and capital-allocation quality of buyback programmes, in both trusts and trading companies.

Shareholder Dilution

Cross-Sector

What is shareholder dilution? Dilution is the fall in each existing shareholder’s percentage ownership when a company issues new shares. It is not automatically a bad thing: if the capital raised earns more than it costs, existing shareholders can still come out ahead. Rights issues let shareholders avoid dilution by buying new shares pro rata; placings do not. Edison builds the potential dilution from raises, options, warrants and convertibles into its per-share forecasts.

Small-Cap

Cross-Sector

What is a small-cap company? A small-cap is a listed company in the lower-to-middle band by market value. There is no single official threshold, but in line with Edison’s market-cap filter, the term is used here for companies from roughly $100m up to about $2bn (above micro-cap, below the largest caps). Small-caps are usually established businesses with limited broker research, and they have historically been more volatile than large-caps. The information advantage from thorough independent research tends to be widest here, which is where Edison concentrates much of its coverage.

Sum-of-the-Parts (SOTP)

Cross-Sector

What is a sum-of-the-parts (SOTP) valuation? An SOTP valuation values each division or asset of a multi-business company on its own and adds them together, rather than applying a single multiple to the whole. It earns its keep when the parts have very different growth or risk profiles. Across Healthcare, Technology and Industrials, Edison uses SOTP: it spells out the value put on each part, and shows which assets account for most of the value, and so most of the risk.

Target Price

Cross-Sector

What is a target price in equity research? A target price is an analyst’s estimate of a share’s fair value under a stated valuation method: DCF, peer comparison or sum-of-the-parts. The gap between the current price and the target shows the potential upside or downside implied by that analyst’s assumptions, and should be read with the method, the risks and the sensitivity analysis. Edison frames its valuation as analysis of value and the assumptions behind it, not as a recommendation to buy or sell.

Total Addressable Market (TAM)

Technology

What is Total Addressable Market (TAM)? TAM is the maximum annual revenue a company could earn if it captured every customer in its target market. Investors use it to test whether the growth opportunity is big enough to justify the valuation. A company claiming a £500bn TAM against £20m of revenue is probably drawing the market too widely; the more useful figure is the serviceable market it can realistically reach. When weighing the growth case for the technology companies it covers, Edison takes a critical view of TAM.

Related: ARR · EV/Sales · Rule of 40 · Technology research · Boku

Total Return

Investment Companies

What is total return in investing? Total return is the overall return from an investment, combining capital gain or loss with income (dividends or interest): a share rising from £100 to £108 with £5 of dividends delivers a 13% total return, not just the 8% price gain. NAV total return is the main benchmark for investment trust manager performance. For the trusts it covers, Edison presents both NAV total return and share-price total return, so comparisons across different periods give full credit to income.

Trading Update

Cross-Sector

What is a trading update? A trading update is a short regulatory statement a listed company issues between its main results, usually near a quarter- or half-year end, saying whether trading is in line with, ahead of or behind expectations. Even a brief update can move a share price sharply if it signals a gap from expectations, which makes updates a frequent trigger for Edison flash notes.

Update Note

Cross-Sector

What is a research update note? An update note revises an analyst’s forecasts and view after new information, usually results or a significant development, and says whether the investment thesis is intact, strengthened or weakened. Edison publishes update notes through the life of its coverage, so the framework set out at initiation stays current as events unfold.

Vacancy Rate

Real Estate

What is vacancy rate in property investment? Vacancy rate is the percentage of a property portfolio that is empty and earning no rent: a 5% vacancy rate means 95% is let. Rising vacancy reduces rental income and often adds costs to refurbish or re-let the space, and it can signal weakening demand or asset-quality problems. When assessing the property companies it covers, Edison reads vacancy alongside occupancy, WAULT and net initial yield.

Valuation Multiple

Cross-Sector

What is a valuation multiple? A valuation multiple compares a company’s value with a financial metric such as earnings, EBITDA, revenue or book value; common examples are P/E, EV/EBITDA and EV/Sales. Multiples make peer comparison quick, but they have to be read with growth, margins, risk and capital structure, since a low multiple can reflect real problems rather than a bargain. In its peer tables, Edison uses multiples to frame its DCF and other intrinsic valuations, not to replace them.

WACC (Weighted Average Cost of Capital)

Cross-Sector

What is WACC? The weighted average cost of capital (WACC) is the minimum return a business must earn to satisfy all its capital providers, the lenders who want interest and the shareholders who want a return, weighted by how much of each it uses. It is the discount rate in DCF models, where a one-point change in WACC can move a long-duration valuation by 10–20% or more. Every DCF-based valuation from Edison discloses its WACC assumptions.

Warrant

Cross-Sector

What is a warrant? A warrant gives the holder the right, but not the obligation, to buy shares at a fixed price within a set period. Warrants are often attached to fundraisings as a sweetener. If exercised they dilute existing shareholders, since new shares are issued at the exercise price. Edison factors outstanding warrants into the diluted share counts in its per-share forecasts.

Working Capital

Cross-Sector

What is working capital? Working capital is the capital tied up in day-to-day operations: current assets minus current liabilities, covering items such as receivables, inventory and payables. When it deteriorates, say customers start paying more slowly or inventory builds up, that can be an early warning of pressure before it shows in reported profit. Edison monitors working-capital trends as a lead indicator of cash and trading health across its coverage.

WAULT (Weighted Average Unexpired Lease Term)

Real Estate

What is WAULT in real estate? WAULT (weighted average unexpired lease term) is the average time left on a property portfolio’s leases, weighted by rental income, so the leases that bring in the most rent count for the most. A longer WAULT generally means more secure future income; a shorter one can add re-letting risk and earnings uncertainty. To assess income security for the property companies it covers, Edison reads WAULT alongside occupancy, vacancy and net initial yield.

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