--Key figures for stock analysis--
Hello all,
For the past year I have been dealing almost exclusively with ETFs and have never really taken the time to look at individual stocks. But what is the best way to start to find a suitable stock? Key figures! I took a look at some ratios and tried to explain what they mean and how to calculate them. Thereby I have learned new things myself and of course I am open for improvement suggestions and ideas!
𝗠𝗮𝗿𝗸𝘁𝗸𝗮𝗽𝗶𝘁𝗮𝗹𝗶𝘀𝗶𝗲𝗿𝘂𝗻𝗴
This key figure describes the stock market value of a company. It is calculated by multiplying the number of outstanding shares by the current stock market price. Among other things, it is a criterion for inclusion in a certain market index, such as the German DAX Index or the American S&P 500, among others.
𝘉𝘦𝘪𝘴𝘱𝘪𝘦𝘭:
1,000,000 shares were issued by ThisIsEmil-AG. From the current IPO, you can see that each share is currently fetching €350. So multiplying 1,000,000 shares by €350 gives a market capitalization of the company of €350,000,000. As a rule, a distinction is made between three capitalization figures:
1. large-cap companies: 10 billion U.S. dollars +.
2. mid-cap companies between 2 billion and 10 quadrillion U.S. dollars
3. small-cap companies between 300 million and 2 billion US dollars
𝗞𝘂𝗿𝘀-𝗚𝗲𝘄𝗶𝗻𝗻-𝗩𝗲𝗿𝗵ä𝗹𝘁𝗻𝗶𝘀 (𝗞𝗚𝗩)
The price-earnings ratio is a ratio called price-earnings ratio (PER or P/E ratio) in English. The ratio indicates the ratio of the profit of a listed company to the current stock market valuation.
Caution is advised with this ratio, as high-growth companies that generate high profit increases have a higher P/E ratio than shares of companies that grow slowly but steadily. Therefore, depending on the investment strategy, a closer look must be taken.
A stock with a P/E ratio of less than 12 is normally good value. If the value is above 20, the stock is considered expensive. However, it is helpful to compare the values within an industry.
𝘉𝘦𝘪𝘴𝘱𝘪𝘦𝘭:
If the share of ThisIsEmil-AG costs 100€ and the company earns 6€ per share, the P/E ratio calculation is:
P/E ratio= price of a share / earnings per share.
P/E ratio = 100 / 6€ (earnings per share)
P/E RATIO = 16.67
𝗞𝘂𝗿𝘀-𝗨𝗺𝘀𝗮𝘁𝘇-𝗩𝗲𝗿𝗵ä𝗹𝘁𝗻𝗶𝘀 (𝗞𝗨𝗩)
Another ratio is the KUV, which is a ratio of a company's current market capitalization to its annual sales. Valuing a company with the KUV is helpful if the company is young or has cyclically fluctuating sales returns. Similarly, the P/E ratio is helpful for companies that are in the start-up loss phase. Normally, the P/E ratio described above is more meaningful, as the KUV does not provide any information on the profitability of the company.
It is also recommended to evaluate the company with other ratios besides the price-turnover ratio.
𝘉𝘦𝘪𝘴𝘱𝘪𝘦𝘭:
ThisWouldBeEmil-AG consists of a total of 200 million shares and generated revenue/sales of 2 billion euros in the last fiscal year. Thus, the revenue per share amounts to 2000/200 = 10 euros. The current share price is 9 euros.
KUV = 9 euros/10 euros = 0.9
This means that the share - with a KUV of less than 1 - is recommendable if only the KUV is used as the sole key figure.
𝗘𝗶𝗴𝗲𝗻𝗸𝗮𝗽𝗶𝘁𝗮𝗹𝗾𝘂𝗼𝘁𝗲 (𝗘𝗚𝗤)
The equity ratio is an indicator of how solidly a company is financed. A small and simplified digression regarding total capital: the origin of a company's assets is divided by total capital into equity and debt. Equity capital is capital which, for example, the owner of the company has raised himself to finance it. Debt capital, on the other hand, describes the capital that companies receive from third parties. This may include banks that lend money to the company.
A high equity ratio is therefore seen as positive, as the company is then financed primarily from its own resources and is not dependent on borrowed capital. This means that the company is not in danger of not being able to repay its debts.
𝘉𝘦𝘪𝘴𝘱𝘪𝘦𝘭:
ThisWasEmil-AG has 1,000,000 euros of equity. Its total capital is 2,000,000 euros.
EKQ = (1,000,000 / 2,000,000) x 100 = 50 %.
This company therefore has an equity ratio of 50 percent, which is a very good value.
𝗗𝗶𝘃𝗶𝗱𝗲𝗻𝗱𝗲𝗻𝗿𝗲𝗻𝗱𝗶𝘁𝗲
The dividend yield is important for dividend hunters. It indicates the relationship between the share price and the dividend paid or announced. The ratio is often published by stock corporations for investors. The calculation depending on the dividend - paid or announced - can have advantages and disadvantages. The announced DR is only a forecast and can of course deviate and is thus only to be seen as a guideline. Of course, the dividend already paid is also a basis for speculation. It is important to analyze the dividend yield over several years.
𝘉𝘦𝘪𝘴𝘱𝘪𝘦𝘭:
One holds shares in a company at a share price of 100 euros. The dividend is 5 euros.
Dividend yield = (5 euros/100 euros) x 100 = 5 percent.
A company with a very high dividend yield includes. $BAS with a yield of approx. 5 percent.
Of course, that was only a selection of key figures. What else do you find important the free float? The earnings growth? Or the return on equity?
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