Friday, 1 July 2011

Understand the term stock investments to help increase skills

Today I will explain about some of the popular terms in stock investing. I hope after this we can talk about investment in shares and eventually with the shared knowledge and experience to be more involved in investing in the stock market.
These terms are listed with reference to Malay glossary issue Routledge, 2001. Among the terms you need to know in share investments include:
1. Bull market bull market refers to the stock market increased by 20 percent or more in a long period is usually due to the improved performance of listed companies recorded a profit growth results benefited from an expanding economy. The term is said to have originated from the habits of the bull that attacked the victim on the gore. Examples bull market is a rising market trend began in August 1998 to early 2000. At that time, many people make a profit on their investment.
2. Bear market trend situation of the market plunged 20 percent or more in the long run due to favorable economic conditions. Associated with the nature of the bear that attacked the victim down menghenyak habit with sharp claws. Examples of the bear market is the performance of the Malaysian stock market which plunged during the 2008 impact of the global economic crisis.
3. Earnings per share more popular English term that referred to in EPS or 'Earnings per share. " It is the most common indicators used to evaluate stock prices. In comparing the two companies engaged in the same industry or sector, often the company recorded a high EPS is better than companies with lower EPS. Imagine two companies, namely B and H respectively to generate profit of RM100 million. If company B has a stock of 10 million units and the H has 50 million shares, which companies perform better? In short, to choose which company is better, investors can look at the EPS of the company. Earnings per share (EPS) = Profit / Total Stock Unit EPS is calculated by dividing the company's profit in 12 months with the number of units. For example, PETRONAS Gas Bhd generate a net profit of RM1, 439 million in 2010 and it has issued 1.979 million shares. Thus, earnings per share is RM0.727 (RM1, 439 million / 1.979 million units = RM0.727). Meaning, for every unit of PETRONAS Gas generating its profit of 72.7 cents. Returning to the example of B and H above, the EPS of B is 10 (RM100 juta/10 million shares) and EPS of H 2 (RM100 million / 50 million units). So it was better for us to invest in company B, is not it? The answer, perhaps. In choosing stocks where we can buy, we can not look at the EPS alone. As described above, RA can help to compare the performance of a company with another company in case the company is engaged in the business sectors or industries. EPS can not show exactly whether the shares of a company is suitable to be bought or the market valuation of shares. To make more accurate choices, investors must consider other factors and indicators, and one of them is by looking at the ratio of the acquisition price.
4. Price-earnings ratio is a measure commonly used by investors to calculate the value of the shares, whether expensive or cheap, relative to company profits. In theory, a price-earnings or PE ratio shows the cost or the price paid by investors for every dollar of profit generated by the company. Price earnings ratio = Share price / EPS PE Ratio is calculated by dividing the stock price with earnings per share (EPS). We see examples of the company PETRONAS Gas at one point traded at RM12.30 per share. With EPS of 72.7 sen per share, the PETRONAS Gas Price earnings ratio was 16.9 (12.3 / 0,727 = 16.9). In theory, a price-earnings guidance of what is paid by the investor willing to hold shares in a company that generates a certain profit. For example, PETRONAS Gas shares investors are willing to pay 16.9 times per profit per share. High Price earnings ratio indicates higher investor confidence on a company and as such many people buy it cause the stock price increases. Price earnings ratio is a better indicator of alleged to assess the share price compared to just look at the share price. However, like other indicators, investors can not rely on the PE ratio alone, and should also take into account other factors including the rate of growth. PE ratio is suitable for comparing the shares of a company with other companies involved in the same industry. Every industry has a range of different PE ratios. For example, shares of companies in the technology sector generally has a very high PE ratio compared to the plantation sector.

No comments:

Post a Comment


Related Posts Plugin for WordPress, Blogger...