How to determine the value of a stock
Share prices have driven the result of a company results and information concerning the prospects of a future society. It 's the most important factor in the evaluation of evidence. I can not stress enough, determining what should be a stock trading is entirely dependent on the result of a society and its ability to maintain or increase profits in the future.
Background
Companies release earnings reports on a quarterly basisRule in January, April, July and October. These reports provide important information for evaluating the stock price, and it is common to see public release large movements in the price of a company's earnings immediately. Even now, most companies offer us a guide that indicates what the company expects to earn next quarter.
Several key statistics are easily derived from a company report earnings, including results of a company and Company earnings per share.
Definitions
One company, earnings per share for the company's net income compared to the total number of shares outstanding.
Earnings per share = (Net Income – Dividends on preferred shares) / (average of shares outstanding)
The P / E (price-earnings ratio) is commonly referred to as the collector and is equal to the price of shares in the company press conference annual income per share.
P / E = CurrentShare> price / earnings per share annual
Conversely FP / E Ratio (forward price-earnings ratio) refers to the current price of a company forecast annual earnings per share next year
FP / E Ratio = Current stock price / earnings per share projected annual
Rating
The P / E is an important measure that is taxed as investors are willing to pay for the current revenues of the companies mentioned. At a fundamental level, the higher the PERatio, the higher the price. However, shares are not traded shares on the basis of their profits in progress, but on the basis of their future expected income. In other words, a company is worth no matter what he is doing today, but what he does tomorrow.
Value Stocks
securities with a value are simply exchanged securities with low PE ratio. These stocks generally have much lower growth rates, which means that their profits should grow at a much slower pace, less is usuallythen ten percent a year. It 'important to note that value stocks are growth stocks over the past ten years exceeded. An example of added value, Exxon Mobil Corp., now trade at 12.3 times earnings.
Growth Stocks
Growth of trade in stocks at high PE ratios because it is totally trading on future profits rather than current income. These are companies whose earnings are expected to grow significantly in the future. Investors are willing to pay able to generate more business, the highest return in the future. When growth stocks are very driven to future income, a growth company, which reported lower than expected profit decline substantially in the news. One of the rules of Jim Cramer is, never buy a share, double the rate trades above its growth. That is, if a company is expected to increase to 10 per cent and is trading at a multiple of 20, who holds the shares expensive. An example of growth> Stock Transocean is currently growing by 205 percent, and the value of the shares of Transocean a trade, as only 10.8 times current earnings.
Shares with revenue growth accelerated
Stocks whose future earnings are greater, so the profitability of the company are not only growing, but to continue to grow faster, earn very high P / E ratio. These stocks are very risky, but can offer huge returns, if their growth ratecontinues to increase.
Conclusion
In the evaluation of the actions is important not only to current income, but keep in expected future profits. We want that inventories are low purchase more than their expected profits. That is, we always want to search for titles that have come forward on their current growth rates are multiple. It 'also important to keep up with the news, looking for things that can affect a company's present or futureResult.
Disclaimer
It is not enough, the result of a purchase order in a society based on equity alone. There are many factors that can affect the performance of a company. This is just one of many indicators used to value a company's current stock value.
