To: Jenna who wrote (23792 ) 2/1/1999 11:22:00 AM From: Jenna Read Replies (2) | Respond to
Fundamental Analysis: The Gray area for Short Term Trading.Return on Equity : the amount of return on your investment. Shareholders equity divided into the net income. Minimum should be about 17% and over 25 is great.Price to Sales: the price of the stock and divides it by the sales per share. The price per of a stock divided by the sales per share that a companies produces. You want the P/S to be below 1.. Generally thought huge hi-tech companies like INTC and MSFT have them about 3. Good to use for the internet stocks. The barometer of health of a company Current Ratio tells you how much cash and equivalents as well current inventory the company has to pay its bills I I've come across companies with as much as 11.Quick Ratio is the cash and cash equivalents divided by the current liabilities. A company has to be prepared to meet its short term debt and any other challenges they might face, or even if they want to make and acquisition that looks very promising.debt-to-equity ratio The less debt the better. Some companies are cash cows with little debt (like USNA, SALT).. I won't even consider putting a company with a large debt as an earnings play.Earnings per share ... The grandaddy of all the ratios. I look for consistancy and an Correlation Coefficient of at least .7 for the last 4-6 quarters. Simply put it means that each quarter was higher or improvement in EPS from the previous quarter. Even if a company is still not profitable, the amount of loss should shrink from quarter to quarter. Ideally you would like to catch a company with its first profitable quarter or at least with the reporting quarter to be profitable if the same quarter last year was negative (BVSN, NTBK).Revenue Growth ..important for internets stocks. If a company's revenue is not growing they will never be able to finally cut their losses and eventually make a profit. Revenue growth counts, and the more the better. I look for a Revenue growth of 25% a year (that's high but for an earnings play you want the top 1-3% of stocks)Price/Earnings to Growth (PEG) ... One of my favorite indicators for the value stock group. Take a stock's P/e and divide it by the average earnings' growth rate for the last 5 yers. If it's less than 1, its good. I like less than .75 and more. A 1 is obviously a stock that is already at its full value. Profitability of a company (which we don't have with the internet sector) we have our Return on Sales, Return on equity and Return on Assets which were discussed in a previous post.
