The Successful Investor will review potential investment opportunities company-specific development cycle, not earnings per share are based on the course of history. In practice, the performance of the company is possible to measure a variety of indicators, girl scout which can eventually be applied to the valuation of share-level AEB. In this entry I present summary output results, which will tell shareholders how the company makes a lot of business through the purchase of a single girl scout batch of the result as a percentage per year.
I recall that the P / E ratio, ie the share performance factor was one of the first investment activity through the figures. Said indicator tells investors how many years the company will pay the current share price back to the business net income statement. In this context, a rather straightforward assumption is that the net profit of the company will remain completely unchanged in the coming years. Indicator of the P / E ratio is, therefore, no more than illustrative girl scout purposes girl scout only - although not quite literally, because the statistic does not take any position on the company's earnings growth rate of earnings or even change direction.
Since then, I am pleased to apply the higher P / E ratio of the inverse of earnings yield (E / P), which is what this label is all about. Since the two-letter rotation of the division line on both sides of significance does not open automatically, open the entry to begin with two key figures open as easy to read.
The conversion rate, ie P / E ratio can be calculated by dividing the company's stock price (P) business earned earnings per share (EPS). The same conclusion also leads to an alternative path, where the company's total market capitalization value (P) distribution of the company's absolute girl scout ie cash net profit (E). Regardless of the investor's choice of the above formulas for the case from the E / P ratio calculated by dividing the number one share P / E ratio. Earnings yield is therefore girl scout the inverse of the coefficient results.
Earnings Yield photos practice other side of the coin the same thing as the P / E ratio, that is, how the stock is valued girl scout in relation to the Company's assessment of the present ansaintakykyyn. Personally, I prefer the earnings yield, girl scout especially since that statistic tells an investor the percentage completed form, and how much is the current cost share dividend would be, if the company decided to divide the total of the annual net profit out as dividends. The perspective is of course theoretical, but, once again, for illustrative purposes only.
All in all, the result is precisely the return on the shareholder's long-term girl scout approach to investment. The figure describes how much of the investor receives a return on self-listed company's business through. The result, therefore, calculate the performance, attention to what is actually a listed company to produce its owner. The angle of vision is not, therefore, nothing to do with what the next investor is willing to pay for the company's shares tomorrow. In this perspective, referring to distinguish the investor and speculators.
Earnings yield the interpretation girl scout of the driving rule of thumb is as simple girl scout as possible: The higher the earnings yield is a percentage, the better the investment in question is the current purchase price. In this context, the result sort of return on fixed income investor receives interest income on investments comparisons.
The same logic, of course, understandable P / E ratio of interpretation girl scout through the reverse: In general, an investor should choose a low P / E ratio of shares and treated cautiously high value to beneficiaries of the PIN shares. girl scout The low earnings yield of high-P / E ratio of shares is priced at earnings growth, the implementation of a risk to conservative investors. girl scout Investment income and eventually formed not only by the actual development cycle, including shares purchased already priced growth expectations and the actual results of the difference between the final. girl scout This is why you should buy the shares as moderate expectations prevail.
I now turn to apply the key figures in practice. In general, financial theory put forward by the investors an annual yield requirement of about 10 per cent. The exact figure for the value of a matter of taste, but it does not affect this entry illustrating the topic at all. Next, I show how the market mechanism is continuously working to ensure around 10 per cent of a return to new investors.
I chose this time to note an example from real life companies - they are the forest company Stora Enso and the tire manufacturer Nokian Tyres. girl scout In the following calculations use the shares in the time of the examination date 05.03.2013 and the company-specific performance for the most recent financial statements. Sufficient calculations, the investor needs, therefore, self-knowledge, as well as a listed company and its shares.
Stora Enso's shares are currently trading at a price of 5.27 USD (P). The company is at the same time equity per share of EUR 7.32 (BV). The share price
