COMPANY FUNDAMENTALs
information such as
PROFITABILITY, REVENUE, ASSETS, LIABILITIES, DEBT, AND GROWTH POTENTIAL
are considered fundamentals
COMPANY FINANCIALs
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES
DEBT RATIO = TOTAL LIABILITIES / TOTAL ASSETS
RETURN ON ASSETS RATIO = NET INCOME / TOTAL ASSETS
RETURN ON EQUITY RATIO = NET INCOME / SHAREHOLDER’S EQUITY
DIVIDEND YIELD RATIO = DIVIDEND PER SHARE / SHARE PRICE
EPS = EARNINGS PER SHARE RATIO = NET EARNINGS / TOTAL SHARES OUTSTANDING
PE = PRICE-EARNINGS RATIO = SHARE PRICE / EARNINGS PER SHARE
COMPANY PAYOUTs
DIVIDEND, BONUS, RIGHTS
A payout is the share of profits that a listed company will pay its shareholders. If the payout set out in the company’s shareholder remuneration policy is 50%, the company will distribute half of its net profits among its shareholders.
A dividend is cash paid to shareholders for their share in the company's profits.
A share buyback and the subsequent cancellation of shares are when the company “buys back” its own shares to reduce outstanding share capital and increase its share price.
MOST IMPORTANT STOCK MARKET METRICS
(1) RETURN ON INVESTMENT (ROI)
Money a company has made or lost on an investment.
If an individual investor were to invest $1,000 into company's stock
and
5 years later sold it for $2,000, they had a 100% return on investment or ROI.
(2) EARNINGS PER SHARE (EPS)
A measure of a company's profit.
EPS will tell the investor how much money the company is earning per share.
It doesn't provide the expense information.
A high EPS generally means that the company performed well during the specified earning period (typically a quarter or a year)
If one company made $10 per share and another made $12 per share, the second company's earnings are more impressive only if they spent the same or less money to generate the income.
(3) PRICE-TO-EARNINGS RATIO ( P/E Ratio )
It helps to determine whether a stock is overvalued or undervalued.
A company's P/E can also be benchmarked against other stocks in the same industry or against the broader market.
P/E Ratio Formula and Calculation
EPS is generally given in Trailing 12 months.
TTM represents the company's performance over the past 12 months.
Typically, the average P/E ratio is around 20 to 25.
Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio.
Different industries can have different average P/E ratios.
It’s important to always compare P/E ratios with other companies within the same industry.
(4) PEG Ratio ( Price/Earnings-to-Growth (PEG) Ratio )
The PEG ratio is used to determine a stock's value while also factoring in the company's expected earnings growth,
It is thought to provide a more complete picture than the more standard P/E ratio.
EXAMPLE:
If the trailing P/E ratio of a company is 25 and its earnings growth rate for the next five years is 15%, then its PEG ratio is 1.67 or 25 divided by 15.
In general, a good PEG ratio has a value lower than 1.0.
PEG ratios greater than 1.0 are generally considered unfavorable, suggesting a stock is overvalued.
PEG ratios lower than 1.0 are considered better, indicating a stock is relatively undervalued.
A negative PEG can result from either negative earnings (losses),
or
A negative estimated growth rate. Either case suggests that a company may be in trouble.
Comments
Post a Comment