NEWSLETTER
Enter your email address below to subscribe to our newsletter.
Membership Benefits!
- Get Free Stock Picks in your email.
- Penny Stock Picks poised for growth.
- Well researched Best Penny Stocks.
- Hot Penny Stocks can make you rich!
- Get Growth Stocks.
Join now!
- Penny Stock Picks poised for growth.
- Well researched Best Penny Stocks.
- Hot Penny Stocks can make you rich!
- Get Growth Stocks.
Testimonials
"I have been geting stock picks from these guys for a while and they have been dead on for most of these stocks. Thanks for the great stocks."
John Daly
"Very helpful information in all the emails, and think these guys have the best stock picks from any other sites. Would recommend them to traders of all experience."
Jason Fink
Latest Articles
Analyzing Stocks for Advanced Traders Using Revenue Figures
For people who have been playing the stock market for some time, the usual indicators such as moving averages, price/sales ratio, and others are inadequate in the in-depth financial analysis for their investment portfolios. Much more complex calculations, projections and figures are needed. Let's now take a look at the indicators that are derived from the company's earnings, growth projections, dividends and assets.
The earnings per share (EPS) is computed by taking the net earnings and dividing this by the outstanding shares. Three EPS figures are usually calculated: trailing EPS - which shows actual figures for the previous year, current EPS - the projected figures for the current year, and forward EPS - projected numbers for the future. However, many traders don't look at the EPS values alone in evaluating a company's potential - they also study its P/E and PEG numbers for a more comprehensive picture.
The price to earnings ratio (P/E) is calculated by taking the share price and dividing it by the company's EPS and it shows whether a stock's price is high or low in relation to its earnings. The higher the P/E, the more buyers there will be for the company stocks - a good clue on what value the market gives on a company's revenues. A high P/E may indicate high hopes for the stocks or it may mean that the shares are overpriced while a low P/E is generally construed as a no-confidence vote on the stock or it is just one case of a value stock overlooked by the market.
Another useful number is the projected earning growth (PEG) ratio. The PEG is computed by taking the P/E and dividing it by the projected growth in earnings. For example, if a stock has a P/E of 20 and projected earning growth next year of 10%, it would have a PEG of 2. A low PEG ratio means that you'll pay less for each unit of future earning growth, so that a stock with a high P/E and high forecast growth may be considered a good buy. It is important to remember that PEG figures are based on projections which sometimes could be inaccurate.
The Dividend Payout Ratio (DPR) measures the payout to stockholders in the form of dividends and it is derived by dividing the annual dividends per share by the EPS. By itself, DPR tells nothing much, as the figure can vary widely depending on the circumstances of the company or the industry. A rapidly expanding company will normally pay little dividends as profits are used in its expansion while businesses in mature industries with little room for growth usually pay higher dividends.
Closely related to the DPR is the dividend yield, which measures the percentage return of dividend payouts. To get the dividend yield, take the annual dividend per share and divide it by the stock's price. This is an important metric particularly for dividend investors, as it shows which companies are consistent in dividend payouts.
The Return On Equity (ROE) is computed by taking the net income and dividing this by the company's book value. The ROE measures how efficiently assets are used to produce earnings and it is a good way to spot firms with a competitive advantage. A range of 13% to 15% ROE is a good sign, but be sure to compare figures for companies in the same industry to get the whole picture. Also, be sure to consider (legal) accounting tricks which may lower book value and artificially drive up the ROE, such as loans and write-downs.
The earnings per share (EPS) is computed by taking the net earnings and dividing this by the outstanding shares. Three EPS figures are usually calculated: trailing EPS - which shows actual figures for the previous year, current EPS - the projected figures for the current year, and forward EPS - projected numbers for the future. However, many traders don't look at the EPS values alone in evaluating a company's potential - they also study its P/E and PEG numbers for a more comprehensive picture.
The price to earnings ratio (P/E) is calculated by taking the share price and dividing it by the company's EPS and it shows whether a stock's price is high or low in relation to its earnings. The higher the P/E, the more buyers there will be for the company stocks - a good clue on what value the market gives on a company's revenues. A high P/E may indicate high hopes for the stocks or it may mean that the shares are overpriced while a low P/E is generally construed as a no-confidence vote on the stock or it is just one case of a value stock overlooked by the market.
Another useful number is the projected earning growth (PEG) ratio. The PEG is computed by taking the P/E and dividing it by the projected growth in earnings. For example, if a stock has a P/E of 20 and projected earning growth next year of 10%, it would have a PEG of 2. A low PEG ratio means that you'll pay less for each unit of future earning growth, so that a stock with a high P/E and high forecast growth may be considered a good buy. It is important to remember that PEG figures are based on projections which sometimes could be inaccurate.
The Dividend Payout Ratio (DPR) measures the payout to stockholders in the form of dividends and it is derived by dividing the annual dividends per share by the EPS. By itself, DPR tells nothing much, as the figure can vary widely depending on the circumstances of the company or the industry. A rapidly expanding company will normally pay little dividends as profits are used in its expansion while businesses in mature industries with little room for growth usually pay higher dividends.
Closely related to the DPR is the dividend yield, which measures the percentage return of dividend payouts. To get the dividend yield, take the annual dividend per share and divide it by the stock's price. This is an important metric particularly for dividend investors, as it shows which companies are consistent in dividend payouts.
The Return On Equity (ROE) is computed by taking the net income and dividing this by the company's book value. The ROE measures how efficiently assets are used to produce earnings and it is a good way to spot firms with a competitive advantage. A range of 13% to 15% ROE is a good sign, but be sure to compare figures for companies in the same industry to get the whole picture. Also, be sure to consider (legal) accounting tricks which may lower book value and artificially drive up the ROE, such as loans and write-downs.
Featured Links
Copyright © 2008 zeba5 LLC