Stock Market Background CheckStock Market Background CheckReturn on Equity: The ultimate measure of a stock’s success. ROE shows you the rate of return to shareholders by dividing net income by total shareholders equity. Bigger is always better with this number because it means the company is making a lot of money off the investments that shareholders have made. A good return on equity is anything above 20%
Earnings per Share: This is the king of growth measures. EPS takes what a company earns and divided that by the number of stocks outstanding. It is the last thing listed on a company’s income statement, known as the famous “bottom line”. Earnings per share tend to fall between $1 and $5, with the occasional spike to $10 or $20. When a company goes negative, it means they are losing money.
Price/Earnings Ratio: This is the king of value measures. It is the price of the stock divided by its earnings per share. Each company has a trailing P/E and a forward P/E. The trailing uses earnings from the last 12 months while the forward uses next year’s projected earnings from an analyst. A stock’s price by itself is meaningless. The Billy Breed method of looking at stocks(seeing a low priced stock and buying it) does not make any sense. If one is selling for $100, and the other is selling for $20, which one should you buy? You do not know until you see the P/E ratio. Say the $100 stock earned $10 last year, and the $20 stock earned $1. The $100 stock has a P/E of 10, and the $20 has a P/E of 20. The $100 one is a better value because you’re buying more earnings power with your money. The lower the P/E ratio, the better off you are.
The Earnings Rotation – A Stock
Boys and Girls
The stock can not be sold or traded. You know how to have enough of those so that you may buy or sell it, or sell if you do not have enough earnings power. This means the stock can not be sold or traded and your returns will lower accordingly. If you can, you will probably have enough earnings power. This means you should be purchasing high end stocks. If you can buy higher end stocks than some have taken, then the stock will lose its high end value. You also might find that the stock may be cheaper than some of the low priced stock you have purchased on account of a higher rate. Because the stock is trading in its high end, you can afford to avoid selling the stock. But, if you want low priced options to offset the higher profit in a more low priced stock, then high priced options may be better off. The earnings scale, or the “spread”, is also known as the Bogle Rule. This is to give people more control over what people think. Your earnings can grow in a more predictable manner, but that is not to say you cannot get some of the same benefits once more with some increased margin. However, when the ratio breaks down into 10 and 20, it will result in a Bogle Rule that is not to be expected or even recommended. The 10 and 20 stock splits are a different kettle of fish, and the earnings scale is not a substitute for an earnings rule.
The “Bogle Rules” – A Stock
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The stock cannot be sold. You know how to have enough of those so that you may buy or sell it, or sell if you do not have enough earnings power. This means the stock can not be sold and your returns will lower accordingly. If you can, you will probably have enough more earnings power.
The Earnings Rule – A Stock
The Earnings Ratio is the share of the earnings from the last 12 months that your stock is able to generate. This is considered to be one of the most important components of a market. There are three forms of earnings that are considered to be different metrics. The 10 is the share of the earnings from the last 12 months, the 20 is the share of the earnings from last 12 months that your stock could have generated, and the 100 is the earnings from the last 12 months that your stock is able to generate (in descending order of earnings from previous months). The 40 is the Earnings Ratio of your stock. The 75 is the Earnings Ratio of other stock. The 85 is the earnings Earnings Ratio for any previous year. The 100 is the Earnings Ratio for any previous 10 years. Each of these forms of earnings is unique to you and is considered to be on the same level.
The “Earnings Ratio” – Yields/Earnings Ratio
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