Analyzing financial statements : security Analysis

Résumé du document

First, let's define what the 'price to book', 'price to sales' and 'price to cash flow' are. The price to book ratio (P/B Ratio) is a financial ratio usually used to compare the stock's market value to its book value. Book value is the term used to designate the portion of the company held by shareholders. Book value is calculated with the company's total assets over its total liabilities. The Price to book ratio is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. It's also known as the 'Price equity ratio'. There are two ways to calculate the P/B Ratio. The first one is to divide the market capitalization by the company's total book value. The second one is to divide the company's current share price by the book value per share. Basically, to be clear, a low P/B ratio means that the stock is undervalued. But a low P/B ratio can also mean that something is wrong in the company. The P/B ratio also gives some idea of whether you are paying too much for what would be left in the company if gets bankrupted, in other words, if the investor is paying too much for what would be left in the company if it went bankrupt.

Extraits

[...] The P/B ratio also gives some idea of whether you are paying too much for what would be left in the company is it bankrupted immediately, in other words, if the investor is paying too much for what would be left in the company if it went bankrupt immediately (www.wikipedia.org). Price to sales ratio (Price/Sales) is a metrics for stocks. It's used for valuing a stock relative to its own past performance, or other companies of the same industry, or market itself. The Price to sales ratio is calculated by dividing a stock's current price by its revenue per share for the last year. [...]

[...] This shows us that there is a relation between the P/E ratio and where g = r x ROE. Indeed, when ROE is low, g is high, and on the contrary, when ROE is high, g is low What is the average PEG ratio (this is the ratio of the P/E ratio to the growth rate, for the firms in your sample? How much variation is there across firms in this industry? Indeed, the PEG ratio is quite similar in this industry. [...]

[...] Actions represent their investment and what they earned. On the other side, there are unpredictable factors that might affect the growth rate of earnings and investors' decisions. For example, the sales of the company cannot be exactly predicted in advance. We can have an estimation of the sales compared to the past year and the market position, but there are still some unpredictable elements that affect sales (snow storm and need of pullovers, unexpected rains due to climate warming would cause an increase in sales of umbrellas for example There are lots of examples which show that the sales are unpredictable at a 100%. [...]

[...] It indicates a relative value and is used to compare a company's market value to its cash flow (www.investopedia.com). Here is the formula to calculate the Price to cash flow ratio: The price to cash flow ratio allows investors to assess foreign companies from the same industry (as accounting laws on depreciation vary across jurisdictions) and have a precise idea on the foreign company they are looking at. Basically, the lower the price to cash flow ratio is, the better valued that stock is. [...]

[...] The price to book ratio Ratio) is a financial ratio usually used to compare the stock's market value to its book value. Book value is the term used to designate the portion of the company held by shareholders. Book value is calculated with the company's total assets less its total liabilities. The Price to book ratio is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. It's also known as the “Price equity ratio”. [...]