Notes
Notes - notes.io |
For Stock selection, use following 4 matrices in COMBINATION to get best stock picks: -
1. PE (Lower value), [Price / EPS]
2. EPS (Higher value), [Earnings / Share]
3. Earning Yield % (Higher value) [EPS / Price === 1/PE ratio]
4. Dividend Yield % (Higher value) [Dividend / Share]
NOTE :--- Higher E/P[Earning Yield %] (aka Lower P/E) is better!
The lower the P/E ratio, the higher the EPS, indicating a higher earnings yield.
Explanations: ----
==================
1. PE (Price per Earning) Ratio (Mkt Stock Price / EPS)
Lower PE < is better!
Lower PE is normally better than higher PE, as higher means more costly stock or overvalued
But needs to be compared with peers or sector. As lower can sometimes mean investor has lost faith.
So should be seen along with EPS and Earning Yield %
2. EPS - Earning per share (Total Earnings minus dividend / Total outstanding stocks)
Higher > is better!
Higher EPS is Better as more earning for each share means better stock growth
3. EARNING YIELD (EPS / PRICE) - [Earnings Yield = EPS / Price = 1 / (P/E Ratio)], expressed as a percentage.
Is in %, It is a reverse of PE ratio.
Higher > is better!
Higher Earning Yield % per share is Better!
Example: If Stock A is trading at $10 and its EPS for the past year (or trailing 12 months, abbreviated as “ttm”) was 50 cents, it has a P/E of 20 (i.e. $10/50 cents) and an earnings yield of 5% (50 cents/$10).
Reading Link : - https://www.investopedia.com/articles/investing/120513/comparing-pe-eps-and-earnings-yield.asp
4. Dividend Yield % (Higher value) - A financial ratio that indicates how much a company pays out in dividends each year relative to its share price
Dividend Yield % = Dividend per share / Price per share
Higher > is better!
Higher Dividend Yield % per share is Better!
NOTES FOR INVESTMENT STRATEGIES
1. To buy stock of a company, it is important to do more research on other aspects like ROE, ROCE, Operating Margin, Management Quality, etc. rather than concentrating only on EPS.
2. However, at some extent you can consider Industry PE as a benchmark to compare individual company’s PE rating.
Author:
Arjun Ghosh
https://www.linkedin.com/in/arjunghosh/
Disclaimer:
I have sourced most of this information from online sources/links and is a collation of this info.
The info is not my own or owned or created by me. I have no copyright over this material. And my collation of info is shared by me here free for all.
|
|
Notes.io is a web-based application for taking notes. You can take your notes and share with others people. If you like taking long notes, notes.io is designed for you. To date, over 8,000,000,000 notes created and continuing...
With notes.io;
- * You can take a note from anywhere and any device with internet connection.
- * You can share the notes in social platforms (YouTube, Facebook, Twitter, instagram etc.).
- * You can quickly share your contents without website, blog and e-mail.
- * You don't need to create any Account to share a note. As you wish you can use quick, easy and best shortened notes with sms, websites, e-mail, or messaging services (WhatsApp, iMessage, Telegram, Signal).
- * Notes.io has fabulous infrastructure design for a short link and allows you to share the note as an easy and understandable link.
Fast: Notes.io is built for speed and performance. You can take a notes quickly and browse your archive.
Easy: Notes.io doesn’t require installation. Just write and share note!
Short: Notes.io’s url just 8 character. You’ll get shorten link of your note when you want to share. (Ex: notes.io/q )
Free: Notes.io works for 12 years and has been free since the day it was started.
You immediately create your first note and start sharing with the ones you wish. If you want to contact us, you can use the following communication channels;
Email: [email protected]
Twitter: http://twitter.com/notesio
Instagram: http://instagram.com/notes.io
Facebook: http://facebook.com/notesio
Regards;
Notes.io Team
