A number of indicators and criteria for investment opportunities - Part 1

P / E is only reflecting the relationship between the market price (current market shares) shares with a net profit of the company for one year ....
P / EThese indicators reflect the relationship between the market price (current market shares) shares with a net profit of the company for one year.
For example, from the financial statements of Bank A '(ACB). Profit after tax in 1999 of the ACB is 51 564 million, divided by the total number of shares: 151.025 VND. Price stock purchase agreement ACB (unofficial market) recently was 1.7 million, so P / E of the ACB with 1.7 million: 151.025 = 11.25 times.
This index is commonly used as a tool for investors to look through the stock cheap or expensive. P / E higher mean higher stock purchase and vice versa. On the other hand, investors can buy with P / E value for hope in the future company profits high P / E is low at that time as the following example: profit in 1999 of a confectionery company 12.7 billion, P / E of 3.4 and profit in 2000 is 14.5 billion, P / E of 2.9.
Investors buy stocks with P / E of 3.4 times compared with profit of 12.7 billion by 1999. If 2000 is 14.5 billion profit, the investor purchased the P / E of only 2.9 times the company's profits have increased and if the profit increase again in 2001, then this P / E will decrease Also, when the investor wants to sell out to other investors and looking at it to see why investors before purchasing P / E is 3.4 times 3.4 times their purchase also okay. The deal is done! Previous investors sold P / E of 3.4 times (or higher if buyers accept) than the profit in 2000, it means that they sell higher than the price at which they bought in 1999.
The problem is that P / E is formed many times this game, here are two cases occur:
- If the investor accepts high P / E, the risk may be higher due to higher purchase price than the company achieved profitability.
- On the other hand buy high P / E can also be low risk, because then the company may buy valuable companies as Coca Cola or Vietnam Airlines, for example, the company is growing steadily regulations.
Since then form a new amplitude P / E for each company, each industry and each of the market environment. Following the trend on the stock market world, the following areas tend to accept the P / E high (not including powerful corporations): banking, securities finance, information technology telecommunications, biotechnology, manufacturing high-tech industries.
Currently, Vietnam's financial experts receive the P / E market in Vietnam from 8-15 times, which means the financial sector banks or other reputable company, the P / E in the market Vietnam from 10-15 times and other areas may be under 10.
However, you just think, if not profitable company means that negative profit, the market share price divided by earnings in a year which is a negative number, how that have P / E be.
Therefore, the P / E is just a relative number, investors also need further evaluation and other financial indicators related more technical in nature.
EPS Analysis
EPS can be understood simply as an indicator to evaluate the company itself generate profitability from capital contribution by shareholders worth. These indicators directly reflect fully the company's intrinsic ability to generate net income (profit can pay to its shareholders) on a share that shareholders, not from capital contributions up or down the stock price on the stock market. EPS higher profit companies create greater shareholder and vice versa. For example, if reached 5,000 dong per share, then it means that companies make a profit of 5% on shareholders capital (assuming the face value of each share is 100,000).
Thus, if a company EPS was only about 8-9% a year, only the interest rate on bank deposits, you should not buy, that's what you must consider before deciding to invest. If you buy the two cases occurs:
- One that you know and hopefully the next time the company can increase profits due to many reasons such as the company is expanding the market, bringing to market new products, upgrading the effective management more ... This decision reflects a real company.
- Second, you find that the stock market, the psychology of other investors more interested in buying shares of this company may have reasons to be favorite company, business is "trendy "such as the rush of dot com companies (Internet companies) in the world so