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Hi
This is my first post, so pls be easy on me!
Anyway, I have studied a lot more about share investing and only stepping into property investing, so I thought I might have a crack at this query.
But before I get into it, I’ll give the one proviso – share investing may look “easy” but it requires the same amount of work, education, time, research, etc. as property investing. So definitely do your research. And work out whether you will be a technical or a fundamental follower and or short or long term investor. If you don’t even know what these terms mean, better start looking!
Anyway, to answer your queries as best I can:
1. Market Capitalisation is the current share price on the Australian Stock Exchange multiplied by the total ordinary share capital on issue.
Impact on assessing share price – next to nil (except to work out how “big” a company is)
2. Dividend Yield is the last available dividend amounts for the year divided by the current share price. Notice the mis-match of timing of the dividends (historical) vs. current share price.
Impact – depends on whether you are seeking a high yielding share or not. Can be similar to property investing – high yield, low capital growth vs. low yield, high capital growth. Often difficult to get both high cap and high yield.
3. Historical Price-Earnings Ratio is the current price divided by earnings per share usually expressed like “15.2”. You can work out whether a share is “expensive” by this ratio where a PER less than 10 might be “cheap” or over 20 might be “expensive”.
4. Historial Earnings Per Share is the amount of earnings (usually a measure like profit after tax) divided by the share price expressed like 4 cents. If the current share price was 50c, you’d have a PER (see 3. above) of 12.5.
NB: “earnings” does not always equal “dividends” – this is important!
Now here’s the problem – they are all historical data…..you query on how to work out how the share price will go in the future – for that, you need to use a bit of this but a lot of some other tools like technical or fundamental analysis. In short, technical analysis is put all the historical share price details, volume, etc. on a graph and use fancy maths to see if there’s a trend going in a certain direction in future. Fundamental analysis is check out what the company is actually doing, what the business plan is, etc. and base your evaluation on that.
Lastly, I wouldn’t necessarily say they did a fantastic job in 12 shares going up 25% without some basis as to why – it could be blind luck.
Cheers
