Price/Growth Flow

There are two ways a company can entice investment. It can earn a high profit. Or it can offer the promise to earn significant profits down the way.

Think of it like a sports team. You want players who are good now, or you want young prospects who are likely going to be good down the road.

Price growth flow combines the two methods of judging an investment winner. It provides a high score to companies that either post sizable earnings now, or have the prospect of significant breakthroughs in the future, as judged by the current investment in product development. All of this is compared to a company’s current stock price, signifying whether the market has already figured out that the company is a winner.

Start with the company's earnings per share, the basic measure of performance in most corporate earnings statements. Then add that to the firm's R&D per share. That figure is derived from dividing the company's research and development expense (as laid out in its earnings statement) with the number of shares outstanding (another stat you'll find in the quarterly financial documents). That combined total then gets divided by the firm's share price.

A high ratio indicates a company that has high earnings or a high investment in the future (or a relatively high mix of both), compared to the market valuation for the stock.