From Stock Analyst version 3.2.5
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R2 (R Squared)
R squared measures the smoothness or consistency of the
company's growth. It is calculated by the program from the
correlation coefficient (R squared) of the company's earnings trend
(for example) over time. This measure, known also as the
coefficient of determination, is a measure of the degree to which
the trend accounts for the observed EPS (the higher the figure, the
better). Above 90% is considered excellent; 80% to 90%, very
good; 70% to 80%, good; 60% to 70%, fair; below 60% indicates a
stock that is probably cyclical; and below 50% indicates a very
weak trend. Figures below 20% indicate no trend at all.
R-Squared has significance both for the possible future
predictability of EPS growth and for the P/E ratio that the market
will pay for that growth. Generally, the market pays a higher P/E
multiple for persistence (length of time) and consistency
(smoothness) in earnings growth.
Hope this helps.
Pat Landers