Interpreting Investment valuation ratios Flashcards
What does a low Dividend Yield mean?
Growth stock
More stable company with long record of consistent growth and steady payments
What does a high Dividend Yield mean?
More mature company
Growing in profit
Paying back to investors
Can you use dividend yield to compare with other companies?
No
What does EPS tells us?
How much each share is earning
Profit attributable to each share
Trend in profitability
What does Dividend cover tell us?
Companies ability to maintain current dividend level
What does a high dividend cover tell us?
Retaining profits for future expansion/growth
What does Price Earnings Ratio tell us?
How highly investors value earnings of a company
How much they are willing to pay for each £ of earnings
Indicates no. of years needed at current EPS to repay share price
Can PE ratio be used for comparison purposes?
Can only compare companies in the same sector
What does a high PE ratio mean?
Shares are in demand
What does ROE tells us?
% rate of return company is achieving on investment funds provided by shareholders
Return on investors investment
What does P/E Growth Ratio tell us?
Determines stock value while taking into account company’s earnings growth
What does a P/E Growth Ratio of less than 1 tell us?
The more the stock is undervalued - potentially attractive
Indicates great growth potential
What does a P/E Growth Ratio of more than 1 tell us?
Sign that the share is overvalued
What does the NAV tell us?
What would be left per share if all debts repaid and remaining assets split per share
For ROE what is shareholder funds?
Share Capital and reserves
