DEFINITION of Timeliness
Timeliness is a proprietary rating system used to rate stocks while taking into account earnings changes and price performance in order to assess potential price performance over the short term. Common market factors are not measured in this stock rating system. The rating of "A" is the highest rating, based on earnings and price performance, and a rating of "E" is the lowest. These ratings are updated daily. Although "A" and "B" stocks may yield higher returns compared to "C" and "D" stocks, these higher rated stocks tend to be much more volatile.
BREAKING DOWN Timeliness
In comparison, the Value Line Investment Survey uses a slightly different rating method. A rating of one is the highest rating while a rating of five is the lowest rating, specifically for 1,700 stocks followed by Value Line, which accounts for about 90 percent market capitalization of stocks on the domestic exchanges. The ratings are relative to the other stocks being followed and based on the likely price performance of a stock over a six to 12-month period.
How the Timeliness Ratings Work
Factors that go into the Value Line timeliness rating system include the 10-year trend of relative earnings and prices, as well as recent earnings and price changes. Unexpected earnings results are also taken into consideration. A forecast of the price change for each stock is generated by a computer program by drawing up the various elements as they pertain to all the stocks being followed for up to 12 months.
- Rank 1 represents the 100 stocks with the highest rating that are collectively are projected to exhibit optimal performance compared with the rest of the companies rated by Value Line.
- Rank 2 consists of 300 that, as a group, are anticipated to show better-than-average relative price performance.
- Rank 3 is made up of 900 stocks that are anticipated to exhibit average relative price performance.
- Rank 4 consists of 300 stocks that are expected exhibit below average price performance.
- Rank 5 represents the lowest 100 stocks that are forecast to show the poorest price performance compared with the other companies in the ratings system.
When using this method it important to consider the volatility of your investment. The rating can be affected by new earnings and changes in price movement. The general market conditions should also be understood by investors since this rating does not acknowledge it and the best stocks could be affected by adverse market periods.