The maverick investor is a qualified investor because he is endowed with vast financial intelligence and knowledge. He applies both fundamental and technical skills in analyzing a company before making a buy decision as he understands that he is operating from outside of the company- thus he is a buying shareholder. He also understood he is investing in business developed and run by others, he also knows that for him to achieve success in this chosen endeavor, that he must have sound financial education to enable him make informed decisions as per analyzing a company from her financial statements.
PRICE EARNING RATION (P/E)
The maverick investor understands that the price earning ratio (P/E) of a stock is an indispensable tool in his hand if he must be successful. It is essential when applying both fundamental and technical inputs in reaching a buy decision. The P/E ration is also called the market multiplier. It is calculated by dividing the current market price of a stock by the previous year’s earning per share (EPS). The result is that, a low P/E would mean that a stock is selling at a relatively low price compared to its earning; while on the reverse a high P/E would indicate that a stock’s price is high and may not be much of a bargain.
Market’s Price (Per Share)
P/E ration = ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬-------------------
Net Income or Earning Per Share (EPS)
The price earning ratio differs from company to company and from market sector to another. Some may be selling for higher prices but with little or no earnings. The high price reflects the market expectation for high earning in the future.
The maverick investor being an embodiment of knowledge and independence of attitude understands that the current P/E is not as important as the future P/E. He wants to invest in a company where the financial future of the company is strong. To fully maximize the P/E ratio he must seek much more information of the company he wants to buy into as a shareholder. He has to compare the company’s ratio for the current year with that of the previous years to determine the growth rate of the company. He will also do cross-comparative analysis of the company’s ratio with those of other companies in the industry or sector of the market.
Written by OKOYE OKECHUKWU PIUS.
Mr. Okoye O. Pius is a Maverick, Investment Consultant/Stock Market Analyst And Publisher ‘Ultimate Investors Edge’ Online Newsletter with a mission to:
“Help you make better investment decisions possible"
Developed and Originated the 'MVSS' Stock Trading Strategy.
Also an author, internet marketer, seminar speaker and host.
http://www.facebook.com/pages/Warfare-Against-Losses-On-The-Nigerian-Stock-Exchange-Initiative-WALONSEI/393528339697?ref=ts,
http://investtoprofitfromstocks.
blogspot.com/
http://tinyurl.com/2we99wq
Email:ultimatewealthmastermind@gmail.com
Contact number:+2347069545121
No comments:
Post a Comment