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Mansoor
by on July 29, 2019
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Investing is easy, but doing it successfully is quite tough. Statistics reveal that majority of retail investors, not the investment professionals, lose considerable amount of money every year. Well, there could be several reasons for that, but there is on that every investor with little knowledge of investment market understands that they don’t have enough time to research a large number of stocks, and they don’t have a research team to get that colossal task easily done. Here the significance of stock newsletters cannot be overshadowed.

Well starting with the basics; investing comprises of set of four basic elements that investors use to break down a stock’s value. This webcast will focus on four commonly used ratios and what they can tell you about a particular stock. Financial tools are powerful tools to simplify the process of summarizing financial statements and maintain the health of company or enterprise.

• Price-to-Book Ratio (P/B)

If you are among glass-half-empty people, price-to-book ratio depicts the value of the company if it gets torn up and sold today. But you must know about it because many companies in mature industries falter in terms of growth, but can still be a significant value on the basis of their assets. The book value typically includes equipment, buildings, land and anything else that can be sold, including stockholdings and bonds.

With purely financial firms, the book value can change with the market as these stocks tend to have a portfolio of assets that shifts up and down in value. Industrial companies have a book value on the basis of physical assets, which usually depreciates year over year based on the accounting rules. In either of the case, low P/B ratio can shield you, but only if it’s accurate enough and this means an investor must dive deep into the actual assets making up the ratio.

• Price-to-Earnings Ratio (P/E)

This Price to Earnings ratio is possibly the most perused of all the ratios. If an unexpected increase in a stock’s price is the hot topic, P/E ratio is the steak. P/E ratio helps you decide if the value of stock can stay up. This ratio can be thought of as how long a stock will take to pay back your investment if there is no change in the business. The reason behind stocks to have high P/E ratios is that investors try to determine the stocks that will fetch progressively higher earnings. But remember, you should compare P/E ratios only among companies in similar industries and markets.

• PEG Ratio

Since the P/E ratio is just not enough, there are many investors who use the price to earnings growth(PEG) ratio. PEG ratio basically integrates the historic growth rate of the company’s earnings. Moreover, this ratio also tells you how your stock stacks up against another stock. PEG ratio is calculated by considering the P/E ratio of a company and dividing it by the year-over-year growth rate of its earnings. Lower the value of PEG ratio, better the deal you are getting about the stock’s future estimated earnings. Comparing two stocks using the PEG ratio will tell you how much you are paying for growth in each case. Simply put, P/E ratio depicts the stand of a company and the ratio is a graph showing where it has been. And using this information, an investor decides whether or not to continue in that direction.

• Dividend Yield

It is always great to have a back-up plan when growth of a stock oscillates. And this is why dividend-paying stocks captivate investors because even when price drops, you get a pay check. Dividend yield tells you about the payday you are getting for your money. Dividing the stock’s annual dividend by stock’s price give you a percentage and you can think that percentage as interest on your money, with an additional chance at growth through stock appreciation.

If you are a novice investor, stock newsletters are the most convenient tools to make your feet firm in the financial markets. It helps you keep up with the pace of the ever-evolving market scenarios and get the jump on the news.

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