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Fundamental analysis the importance of earnings (1)
- 1. Introduction to Fundamental Analysis The importance of Earnings
- 2. What we expect, from Listed companies: Running a good Business “TOP LINE” “Under control..” “Business is growing” Sales -Costs, taxes “BOTTOM LINE” = Net Profit
- 3. “TOP LINE” “Under control..” Sales -Costs, taxes “BOTTOM LINE” = Net Profit Number of Shares ═ EPS
- 4. What is “earnings per share”? A. Net Profit B. Number of Shares C. Net Profit / Number of Shares
- 5. „Does the company have good prospects?‟ „Does it have a bright future…‟ „May “laman” ba yan?‟ Actual EPS over time 2011, 2012, 2013.. EPS 2008 2009 2010 2011 2012 2013
- 6. What company has bright prospects? A.High EPS growth in the past B.High Growth of EPS in the future
- 7. What makes this, a good company ? “TOP LINE” Growing Sales -Costs, taxes “BOTTOM LINE” = Net Profit Work hard to make the SALES grow Competitive under control Growing
- 8. Price X Volume Just because you have big sales, doesn‟t mean, you have big profit. = Sales - Costs Raw materials Cost of Capital Cost of Labor Cost of Land Taxes Cost of Doing Business = Net Profit
- 9. 2000 Gold Price since 1995 300 to 1600 The driving force of Price… 1600
- 10. Price X Volume More people. More money. Big domestic market. = Sales - Costs = Net Profit * Needs more food, shelter, transport, telec om
- 11. “TOP LINE” Sales -Costs, taxes “BOTTOM LINE” = Net Profit Number of Shares ═ EPS
- 12. Valuation What is cheap, what is expensive
- 14. How to Compare Price / Share Earnings / Share Price / Earnings Ratio GLOBE TeL PLDT 1,050 73 2,500 212 = 14x = 12x Lower “Price / Unit” PLDT gives you more “Earnings” for the “Price.”
- 15. Which is cheaper Small Can P50/Liter Big Can 200/5 Ltrs More expensive per Liter Cheaper, despi te bigger price tag Same FUEL
- 16. A market is expensive, when the stocks are near the UPPER LINE Earnings in 2013 Earnings in 2012 Earnings in 2011 2011 A market is cheap, when the stocks are near the LOWER LINE. 2012 2013
- 17. A market is expensive, when the stocks are near the UPPER LINE Earnings in 2013 Expensive Earnings in 2012 Expensive Earnings in 2011 Cheap 2011 Cheap A market is cheap, when the stocks are near the LOWER LINE. 2012 2013
- 18. Strategy SELL BUY BUY BUY Company Earnings = net profits The upper and lower lines are determined by the PROFITS of the company, Times the range of Price-Earnings Ratio.