Saturday, April 6, 2013

Analyzing the company's financial results (PEG, P/CF, EV/EBITDA, DY)

This time we proceed analyzing Apple Inc. stock, starting with PEG, because it has a direct connection to P/E. Let's continue with the previous data, current price being 431.72, because in that case the comparison is more accurate.

PEG - price/earnings to growth

P/E ratio/Annual EPS Growth 

In the last post we calculated P/E of 9.67, shall continue with that.

9.67 (P/E) / 15.90 % (estimates to 2013 sales growth from YAHOO! Finance) x 100% =  0.61

  • The PEG ratio that indicates an over or underpriced stock varies by industry and by company type, though a broad rule of thumb is that a PEG ratio below one is desirable.


P/CF - price / cash flow


The argument for using cash flow over earnings is that the former is not easily manipulated, while the same cannot be said for earnings, which, unlike cash flow, are affected by depreciation and other non-cash factors.



P/CF per share = 50 856 million (annual operating cash flow) / 939 million(shares outstanding)= 

                                                                                      = 54.2 

P/CF = 431.72 (current share) / 54.2 (cash flow per share) = 8

Sometimes free cash flow is used instead of operating cash flow to calculate the cash flow per share figure. 

  • Investors need to remind themselves that there are a number of non-cash charges in the income statement that lower reported earnings. Recognizing the primacy of cash flow over earnings leads some analysts to prefer using the P/CF ratio rather than, or in addition to, the company's P/E ratio. Don't forget to compare this indicator to the company's competitors in the sector. That's because they could be very different depending on the sector. In Apple's case technology. The main competitors can also be found from Yahoo! Finance.


EV/EBITDA - enterprise multiple

A ratio used to determine the value of a company.


Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. 

EV = market cap. + debt + minority interest + preferred shares - cash and cash equivalents* =

397 410 million + 0 (has no debt) + 1.1 million + 5 million (No. preferred shares) x 431.72 (current share price) - 121 251 million (cash and cash equivalents) = 278 318.7 million (EV)

*cash and cash equivalents - An item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately. Examples of cash and cash equivalents are bank accounts, marketable securities and Treasury bills.

EBITDA (earnings before interests, taxes, deprication and amortization) is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.




EBITDA = 156 508 million (revenue/turnover/ net sales) + 14 030 (income taxes) + 0 (no interests in any other companies) + 3 277 million (deprecation and amortization) - 13 421 (total operating expenses) = 160 394 million

EV/EBITDA = 278 318.7 million / 160 394 million = 1.74 


DY - dividend yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

DY = annual dividend per share / share price

Apple intends to pay out 2.65 dollar dividend per share quarterly aka four times in a year.

DY = 2.65 X 4 (annual dividends per share) / 431.72 (share price) = 0.025 = 2.5%

It means if you own Apple shares for 10 000 dollars, you'll get 62.5 dollars worth of dividends every quarter, which makes 250 dollars in a year.


What is going on with my portfolio?


  • Long-term stocks : 
C +2.4%

F  -7%

PFE +12.2% 

Average +2.53%


  • Short-term stocks :
Good thing i sold ITMN, because now it's -8%, compared to -2.6% according to my previous post.

SBUX +7.7% Though I like Starbuck's chart, I will sell, because otherwise it wouldn't be a 
short-term stock.

My takes : 

NDAQ - Nasdaq got many bad news and many opinions suggested that it will be falling in a short-term. Well, they were accurate, because it did fall 15% in one day. But I think it's just a dip. Also RSI* indicator fell to 23. Which means it's oversold and likely to rise.



CLF - it's a pretty huge risk, seeing it has been falling a lot in past 3 months. But I'm willing to take it for a small rise, because if the RSI hits 30 from 29 (currently), then it might hit up 5-10%.



*RSI (Relative strength index) - ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued. 

S&P 500 is +6.2% in year 2013 and from the beginning of this test (portfolio).


Short-term stocks have done better than the long-term according to present prices. But worse than S&P 500. Let's see what the next 2 weeks deliver.








                                                      







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