Link
Indicators
dupont formula
Earnings per share (EPS) >> 賺錢能力
The resulting number serves as an indicator of a company's profitability.
The higher a company's EPS, the more profitable it is considered. (越大越好)
市盈率 (Price-to-earnings = P/E)： cheap or expensive >>the lower the better, as it means it is undervalue
- how much investors are willing to pay for the earnings of a company. Or, it could imply that the market is expecting the company to perform extremely well over time. On the other hand, a low P/E value is seen as unfavorable by the market.
- 上市公司會向股東公佈期內盈利，也就是每股盈利 (EPS)。
- 如果一家公司盈利為1,000萬美元，並有1,000萬股流通股，那麼期內的每股盈利就是1.00美元。市盈率的計算是以公司目前股價除以每股盈利（一般以年度化計算）。舉例說，如果股價為30.00美元，公司過去一年每股盈利2.00美元，那麼市盈率就相當於15，或者會說「市盈率15倍」。這是基本分析最常用的估值指標，兩隻股票若屬相同行業，又有相似的增長前景，那就最適合用這個指標進行比較。
- If the P/E ratio is too low, below 10, that company worth taking a look
市盈率與增長比率 (PEG)： the closer to 1, the better
這個指標令市盈率更加好用。不同企業的增長速度自然不同，這一點值得考慮。
PEG比率的計算方法是以股票市盈率PE除以未來幾年預計年度化的盈利增長率。
舉例說，如果市盈率為20倍，未來5年預計盈利增長率為10%，則PEG比率為2倍。這個指標背後有一個概念，高速增長的公司雖然市盈率較高，看似更昂貴，但若以這個指標看，隨時變得較低增長的公司「便宜」。E.g Tesla
Profitability (ROE and ROIC)
股本回報率 (Return on equity = ROE) >>>用我地ge錢去賺錢ge能力 +ve **(净係可以同同行比較例如coke 同pepsi)
- 這是一個最常用的盈利指標，股本回報率（或ROE）的計算方法是將公司的淨收入除以股東權益（資產減去負債）。
- how effectively a company uses its assets for producing earnings.
- 簡言之，我們從股本回報率可見一家公司利用投資資本賺取利潤的效率，正如多數指標一樣，這指標最好用來比較同一行業的公司。
- 換言之，某家公司的股本回報率為20%，另一家為10%，便可視為前者賺取利潤的效率更高。
- The higher the ROE, the more efficient the company is.
- If a company generates a less than $5 million income this year (say $2 million) with the same shareholders’ equity, this means it is less efficient:
- 50,000,000 / 2,000,000 = 4%
Return on invested capital (ROIC) **(净係可以同同行比較例如coke 同pepsi)
It tells you how much money the company makes on all the money, including both debt and equity,
What is a good ROIC?
For an ROIC, 13.9% is very strong. That means the company is generating a
nearly 14% return on all the cash that’s entrusted to it. The average ROIC of
S&P 500 companies was about 11 in the mid-2010s. But again, it’s best to
compare a company’s ROIC with other firms in the same industry, and
because the tech sector’s average is 12.9, Cisco is right in line.
When ROIC is lower than the return on shareholders’ equity,
When ROIC is lower than the return on shareholders’ equity, that
tells you part of the company’s returns are the result of the use of
borrowed money, or leverage. Borrowed money can boost a company’s
returns when things are good, but sting when business slows.
Meanwhile, during a credit crisis, if borrowing costs rise, a highly
leveraged company will see its ROIC fall.
Distinction between ROE and ROIC
This is an important distinction with return on equity — which only tells you how much return is being driven from the stockholder’s money.
This measure gives a more complete picture of how management is doing,
especially when it’s borrowing a large amount of money.
簡言之, ROE 睇用ge stockholder’s 錢去賺錢ge能力; ROIC 睇用ge 全部錢去賺錢ge能力
Efficiency
Financial condition
debt2quity ratio D/E >>>公司做leverage ge 程度，用我地ge錢去還到錢ge能力 越小越好
Asset = 120000
liability = debt = 100000
equity = ( Asset - Liability ) = 20000
D/E = 100000 / 20000 = 5
that means it has 5 dollars of debt of every 1 dollar of equity
this is bad becuz, generally, you don't want to see a company has 5 dollars of debt of every 1 dollar raised from stock investors
Valuation
市賬率 ( Price-to-book (P/B) ratio = P/B) >>> 一家公司的資產
- 一家公司的賬面值是指其資產價值總和。理論上說，當公司結業清盤，將所有資產變賣一空，這包括有形財產，還有專利、品牌名稱等等，屆時手上可有的資金就是賬面值。
- 市賬率可用來比較一家公司股價與賬面值的比率。正如市盈率，這個指標最適合用來比較同一行業增長特點相似的公司，並應與其他估值指標同時使用。
- value comparison between similar companies within the same industry when they follow a uniform accounting method for asset valuation.
- If the P/B ratio is more than 1, this means investors believe that the stock will grow at a faster pace, which is the reason why its price is higher than its book value.
P/B ratio: 19.88
A P/B ratio of nearly 20 is very high.
This means investors are currently paying nearly 20 times higher price
for an Amazon share compared to the book value of the company.
How do you know if a stock’s price-to-book is high or low?
comparing the stock with the ETFs
Stocks with low price-to-book ratios are called value stocks.
And stocks with high price-to-book ratios are called growth stocks.
Dividend Payout Ratio
- percentage of the company’s earnings paid to shareholders or owners.
- that means The payout ratio measures how large a company’s dividends are relative to its profit.
注意
When a company pays out every penny of net income as a dividend, the payout ratio is 100%. When a company has a payout ratio of more than 100%,
fundamental analysts know that situation can’t last forever. Either the
dividend needs to be cut or the company needs to boost profits to cover the
dividend.
Earning Yield
- A company’s earnings yield tells you how much, as a percentage of a stock’s price, the company is generating in profit. The earnings yield gives you a way to compare a company’s profit generation with other investments.
- When a stock’s earnings yield is well below the market’s earnings yield or that of rivals, it might be a sign the stock is overvalued.
債務對息稅折舊攤銷前利潤 (債務對EBITDA) >>>欠債比例
分析股票時亦應評估一家公司的財政狀況，其中一個好方法就是為公司的債務把脈。坊間雖然有多種評估債務的指標可用，但對於新手，不妨使用債務對EBITDA比率。
您可從資產負債表上找到公司的總債務，至於EBITDA（未計利息、稅項、折舊和攤銷前的盈利）則可在損益表找到。到底債務到達哪個水平才算過多，其實沒有特定指標，但如果一家公司的債務對EBITDA比率明顯高於同業，則可能亮起紅燈，反映投資風險較高。
EV/EBITDA 越大越好
EnterpriseValue
equity + net debt = EV
EarningB4InterestTaxDeprecationAmortisation (EBITDA)
Beta >> volatility of a stock
- indicates the volatility of a stock in comparison to the market as a whole.
Beta是一個證券與S&P 500比較的相對風險。
若某股票的beta為1.5，代表其走勢通常會比照S&P 500但是幅度大50%。因此若S&P漲10%，該股票會漲15%; 但若S&P跌10%，該股票則會跌15%。基本上來說beta值越高該證券的風險越大。
overvalue
If the P/E ratio is higher than the growth rate, the stock may be overvalued.
Financial statement
Corporate financial statment analysis
1. A Review of the Financial Statement
Balanced sheet
Paid-in capital
owners put their own capital into investing a business
Retained Earnings
use the profit to reinvest in the business
What is noted as a liability on a balance sheet?
You are correct!
- accounts payable
Feedback
Accounts payable are debts the company owes, which are liabilities.
Income statement
Revenue - Expenses = Net income
Statement of cash flow
cash flow statement
Cash flow 負數即係佢地想問股東借錢. +ve = generate cash -ve =
點知邊一隻股票係高質?
如果公司的net income > cash from operation, 就是low quality
If a company is generating as much cash as it’s reporting in net income, that can be a good indication it has high-quality earnings.
3 steps
- Look up the company’s net income. As you learned in Chapter 5, a company’s net income is available on the income statement. But you can also take it from the very top line of the statement of cash flows. For Mondelez, net income was $2.2 billion in 2014.
- Look up the company’s cash flow from operations. Cash flow from operations is how much the company generated from its business. It’s kind of like the cash version of net income. If you recall, Mondelez’s cash flow from operations was $3.6 billion in 2014.
- Compare net income with cash flow from operations. You’ll want to see cash flow from operations be at least equal to, if not larger, than net income. That tells you that the company is generating as much cash as it purports to generate in earnings. Table 7-6 summarizes what you need to know. For instance, at Mondelez, the company brought in $1.4 billion more cash from operations than it reported as earnings in 2014, giving you decent confidence the company has high-quality earnings.
lesson :
隻股票仲有幾多年命? (好似醫生同病人講佢有幾耐)
Number of years the company will have cash = Cash and cash equivalents / Annual free cash flow
3 categories
Operating activities
- cash collection
Account receivable
If you’re worried about a company claiming it’s doing better than it really is, this section of the cash flow statement is critical. As you discovered in Chapter 6, a company’s accounts receivable is a tally of how much its customers owe for products they’ve bought. If you see accounts receivable soar, that means customers are mostly buying on credit instead of paying cash. The increase in accounts receivable eats into a company’s cash because the company is essentially giving customers a credit card
- cash for paying inventory
inventory
A decreasing inventory indicates that the company is not converting its inventory into cash as quickly as before. When this occurs, the company ends up having increased storage, insurance and maintenance costs.
Apple inventory 跌緊,證明貨扎係倉,賣吾出
- cash for paying wages, rent and advertising
- When you buy something using a credit card, you get the asset without using cash. It’s the same concept with companies, which may buy supplies or materials on credit. They’re able to get their hands on the things they need to conduct business, without using cash.
- When a company’s accounts payable increases, it’s considered a boost to cash and added to net income.
- WTACH OUT :
Stock-based compensation expense 比股份比員工
Account payable 公司吾用cash 買耶,用
If you notice accounts payable is rising relative to a company’s cost of goods sold, It might mean the company isn’t paying its bills on time, which may inflate its cash.
- Deferred Tax
- This is to ensure a company short-term liability and obligation that will require the use of cash in the future
Investing activities
Capital Expenditures
include 好多野 but generally called Cap Ex:
- Enhancing capacity : 起/租 warehouse
- Updating stores to remain relevant 鋪頭裝修
- Upgrading equipment
- Acquisitions
- Divestitures 買走機器 / 一 D 吾賺錢ge 機器
buying machines, buildings or lands
Financing activities (一般公司無錢or 有新項目想 (借錢or 招股) 提高現金做生意)
1. Borrowing money
Short-term
it’s due within a year
Long-term
it’s due more than a year
Repaying loans
Buying back (or repurchasing) the company’s stock 好似李嘉誠買長江股份來令減少餅ge 數量
- they use cash to take shares out of the hands of the public (investors) by buying them.
- This reduces the number of slices a company’s profits are cut into, potentially making each share more valuable.
Paying dividends
free Cash flow
- The P/E ratio measures how much annual net income is available per common share. However, the cash flow statement is a better measure of the performance of a company than the income statement.
仲有一個term 叫 Free Cash Flow Yield (可同PE ratio )
Free cash flow tells you how much cash a company generates (or uses) during the normal course of doing business, including the cost of upgrading and maintaining its equipment and facilities. Free cash flow is essentially an adjustment to cash from operations to include some of the company’s investing activities.
Cash in
Cash out
2. The DuPont Framework
ROE
Leverage ratio
How
total asset / stockholder equity
Why
leverage means we borrowed money and hope it can generate sales income
Efficiency ratio ( The efficiency of using asset to generate sales )
Measure how much sales are generated
profitability (How well company earn profits)
3. Common-Size Financial Statements
4. Profitability Ratios
5. Efficiency Ratios
6, Leverage Ratios
7. Limitations of Financial Statement Analysis
How to look for attractive companies
Good staying power
Great liquidity
Low debt-to-equity
P/b ratio >> big piles of cash
Stable cash flow
They are on good growth using trend analysis ( see ch 17 )
Great brains behind the operations (management)
Roe and roc
Return on asset = income / asset
Another way of roa but emphasised on profit margin
See the examples from the book
Income here has 2 types : net income and EBIT
Great earnings yield
The earnings yield tells you how much in earnings a company is generating for every dollar you invested.
Diluted EPS / 股價 =*100 每100元q多少錢
What Dividends Can Tell You about Buying or Selling a Stock
Look at dividend payout ratio
Psychology
Other indicators to evaluate the values of a company
Net Present Value
- A method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.
- The higher the NPV, the better
- We take the future value and convert them into the present value based on the given rate (which is called WACC) and time span.
- Add all the present values up and minus the investment
Internal Rate of Return
The question you are answer to IRR is "What is the discount rate that makes NPV equal to zero?"
- The higher the ROI, the better
ROI
The relationship between IRR and NPV
FAQ
Why do we use log return instead of simple return?
log return 能夠反映事實
log return有诸多优势，比如可加性（Ln(a/b) = Ln(a)-Ln(b)），比如能更好地bai反映实际情况。
比如你要计算S&P500的收益率，举个例子1月1号adjusted price是100,2月1号是200,3月1号又降为100。如果我问它的平均每月return是多少？
第一种方法，用每个月的holding period return：2月相比1月的return是100%，3月相比2月的return是-50%，然后你求取平均值：也就是平均月收益率为（100%-50%）/2 = 25%，方法看起来没什么问题，然而却并不符合实际。一月价格是100，三月又是100，实际上相当于没变。这也就是这种它的缺陷。
第二种方法我们用log return，2月相比一月log return是ln(200/100)，3月相比2月log return是log(100/200)，则算数平均值是（ln(200/100)+ln(100/200)）/2 = (ln(200)-ln(100)+ln(100)-ln(200))/2 = 0，这种情况更符合实际。
所以在很多研究领域，我们往往用的更多的是log return，但也并非都不用simple return。
Since the P/B ratio is used to compare the market value of a company with its book value, What is book value?
What is Amortisation?
What to look
To perform a fundamental analysis, you'll want to review a company's financial statements, historical data, investor conference calls, press releases, analyst reports, and analyst estimates.
Common performance metrics
