Examining Financial Data of Companies - Instructions for the novice!

[daaussie]

Hi, I wanted to know how you intrepret financial info for stocks.
For example
how do you relate
Revenue (say 10mil)
EBITDA (say 3mil)
Depreciation say (0.1mil)
EBIT (say $3 mil).

What does it all mean?
DO i need to look at anything else and how do i calculate from this what price the shares should be?

Thanks for your help!

 

[barragolf]

Revenue = Sales of goods or services received in a period of time.
EBITDA = Earnings before Interest Tax Deprecation Amortation, real earnings before effects of accounting policy decisions effect the bottom line.
EBIT = Earning before interest tax.
Depreciation = expense for use of assets in period of time

Compare companies against their revenue and EBITDA. The example given would be sales of 10 - 7 of purchases, salaries etc = EBITDA of 3.
Net profit of 30%

Financial are available from many sources eg yahoo finance, ninemsn finance etc and over many years if available.

Calculating share value depends on industry and discount methods used. See attached newsletter for oil industry. What the calculation determines and what the market is are two very different things. Look at the recent example of biotech vision systems.

Hope this helps, if you are new at shares paper trade first and consider a subscription to a newsletter, could save you a lot more than what it costs.

 

[lancedefrance]

Hope this helps, if you are new at shares paper trade first and consider a subscription to a newsletter, could save you a lot more than what it costs.

Which newsletter do you recommend?

 

[nizar]

Hi, I wanted to know how you intrepret financial info for stocks.
For example
how do you relate
Revenue (say 10mil)
EBITDA (say 3mil)
Depreciation say (0.1mil)
EBIT (say $3 mil).

What does it all mean?
DO i need to look at anything else and how do i calculate from this what price the shares should be?

Thanks for your help!

Work out NPAT
Profit before tax minus 30%

Divide by the number of shares

You get earnings per share (EPS)

Most stocks, ie. industrials trade on 15x earnings (current earnings), banks i think about 13x earnings.

With miners its alot different, they could be valued at anywhere between 5x and 10x next years earnings, but the Price/Earnings ratio is usually less in Mining and in other cyclical sectors.

So if a stock is earning say $1/share, and its trading at $5, id call that pretty cheap, but there are MANY other factors you have to take into account.

One of them the growth rate, ie. the rate of earnings growth for a company. If a company (usually a small one) has very high earnings growth in the near future, the market may be willing to pay a premium for this stock compared to its peers in the same sector.

Much more to it than this, but thats the basics