Stocks or securities
 |
| Stock market |
Shares or securities have neither contractual payment terms nor maturity. If the profits are sufficient. Most companies pay shareholders dividends regularly. But there are no guarantees. And based on accounting instructions. We find that the ownership right in the company entitles the owner to obtain the remaining profits and assets after fulfilling all other obligations, such as bonds. If the company does not achieve profits. The value of stocks became insignificant. And with huge profits. Bonds are paid on time in the hope of remaining a share for shareholders. Securities or stocks are called by many names based on the characteristics of the company.
Classes of shares
- Growth stocks (fast-growing companies) such as: eBay, Google.
- First class stocks (very large companies) such as: Coca-Cola, Pepsi.
- Cyclical stocks (fluctuate greatly with the economy) such as: Ford, General Motors.
- Cheap stocks (risky, small companies and low stock prices) such as: Jeep Electro.
Earnings model
One way consulting analysts try to value a stock is to evaluate the cash flow per share. It is a method that gives great importance to earnings per share growth in its equation, but it does not always produce a reasonable answer.
Value per share = t ÷ (x,n)
t = annual earnings per share.
x=discount rate or required rate of return.
n = annual profit growth rate.
Caterpillar Inc stock
Caterpillar Inc. is a good example. In 1992, the company paid an annual dividend of $1.20 per share. Using the capital asset pricing model equation, it turns out that the required rate was 0.168% (the same as IBM's rate at that time) for a Pechacaterpillar factor of 102. The company's board of directors estimated that the company's board of directors would raise dividends by an average of 0.12% in the last bonds with the stock price being $25.
$1.20 ÷ (0.168 - 0.12) = $25 value of each share
But Caterpillar stock was actually trading at $56 in May 1992, so either the company made more than just the dividend or the market went crazy. But this may happen, as investors must have valued the company's assets and future profits as well. Caterpillar stock did not rise normally and was trading at $73. But after the market recession in 2000, the stock was trading at a stable price of $83 in 2004, while IBM lost 30% of its market rise.
What does the rate do to Walmart discount stores that pay low dividends? How do analysts evaluate Internet companies that do not generate profits or pay dividends? There are no easy equations, but we present below some of the traditional methods used by securities analysts to calculate value.
Price earnings ratio
Analysts compare the ratio of a stock's current price to its current or expected earnings per share. This ratio is perhaps the most widely used evaluation method. It is a simple method. Everyone can divide the price by the profit per share. Dividends for most companies' stocks are also widely published. If this ratio is consistent with the company’s field of work and the market. It may then indicate the appropriateness of the current stock price. To illustrate the significant use of the price-earnings ratio. Here is a recommendation from a stock collector:
Corstis Financial Bank shares
The former Philadelphia National Bank's price of $44 has a low PE/E ratio; The earnings per share is higher than other banks. There is a strong desire to buy.
Earnings growth for price
It is a different form of the price-earnings ratio that includes profit growth. It is calculated by dividing the company's price-earnings ratio by the estimated rate of growth of its profits in the long term. This estimated growth is subject to a great deal of uncertainty. The earnings growth ratio to the price close to or less than 1 is considered possible profitable trades, and in January 2005, the earnings growth ratio to the price of Sina Company reached. It is a company that provides Internet software and services 6, which is an attractive ratio.
Book value multiple
This calculation using information on the balance sheet divides the stock price by the book value of assets per share. In 1992, shares of the biopharmaceutical company Emalcon Systems were sold for 331 times their book value. Forest has confirmed the possibility of overvaluation of the stock. However, the ratios of small companies are often exceptional. Investors often evaluate the potential success of start-up companies rather than their current size. In this case, Emalcon stock fell vertically from a high of $26 in 1992 to $0.31 in 1995 when biotechnology stocks fell out of favor with investors. When the sales became a reality in 1998, the stock was trading at $10, five times the book value, and when Martha Stewart allegedly heard disturbing news about the Food and Drug Administration’s rejection of Emalcon’s application to approve a drug in December 2000, she sold her shares at $60 per share when it traded at a price of Thirty-six times its book value.
Price to sales ratio
The equation is stock price divided by sales. In 1999, the price-to-sales ratio for Internet auction site eBay Inc. was 1,681. With so few sales, the multiple was high, and investors were buying into the future of the Internet. When sales became a reality in 2004, eBay's price-to-sales ratio reached a more reasonable 23.
Asset value per share
When the value of a company's resistant assets on publicly traded stocks is higher than the stock price indicates, then analysts may overlook other ratios. The mania of buying entire stakes in oil companies occurred because their stock prices were lower than the value of their oil and gas reserves and as a result Giti got involved. And dry. And Maysaa. Phillips is in a bidding war that has seen its shares rise.
Cash flow multiple per share
Some analysts evaluate companies based on their ability to generate cash as shown in the companies' cash flow statement. In the case of Caterpillar, we find that it generated $5.90 per traded share in 1992, and when the stock reached $56, its price was equal to 9.5 times the cash flow. Looking forward, analysts signed $11.10 in 1993 and $11.80 in subsequent bonds, three times the expected cash flow. Some optimistic investors saw the value of Caterpillar Flow as a group of analysts valuing the annual cash flow of $17.80 for an unlimited period at a discount rate. At 16.8%, the net present value of the stock would have been $100 (17.80 ÷ 0.168). For them, Caterpillar stock was cheap at $56, and as we mentioned, the stock traded at $60 in 1990 and $83 in 2004, meaning they were all wrong.
In any stock market, there are always traders and sellers, and price movements arise as a result of differences in balance. There are many criteria used to estimate value, but the only one that really depends is the currently announced prices, no matter how crazy they may seem. If the market has room to buy Caterpillar shares at a price of $200, then this is value, of course, if there is an offer. More than demand, prices fall.
Preference shares
Preferred stock is a close relative of preferred stock, a hybrid of bonds and common stock, and is exported by many utility companies. And banks. And in iron and steel companies, preferred shares have the characteristics of a bond in that they pay a fixed dividend rate and do not have voting rights. As is the case with ordinary shares, dividends on preferred shares cannot be paid except after the debt payments are paid first, and they do not have a maturity date. However, most issuers set conditions for purchasing their shares. Preferred shares are withdrawn from trading over time. The rights of preferred shares in a company's assets are ahead of common shares, but they rank behind debt.
Corporations issue preferreds when they want to borrow money and do not want to be contractually obligated to pay interest on time. Most preferred issues are cumulative, meaning that the total of all unpaid dividends must be paid before common stock dividends. Preferred stocks are chosen by investors who prefer more secure dividends but want the benefit of owning Percentage of ownership rights.
