1 Press Ctrl-A ©G Dear2010 – Not to be sold/Free to use Value Shares Stage 6 - Year 11 Applied Mathematic (Preliminary General 1)

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Presentation transcript:

1 Press Ctrl-A ©G Dear2010 – Not to be sold/Free to use Value Shares Stage 6 - Year 11 Applied Mathematic (Preliminary General 1)

2 Trading in shares is generally short term Investing in shares is generally long term When Investing (or trading) in shares we look for value. Many investors look for value with a P/E of less than 10 and yield greater than 3% p.a.

3 Price to Earnings ratio Market Capitalisation (Value of all shares) Net Income A company with a P/E Ratio less than 10 is considered to be a cheap company. Qantas P/E = 5.88 means Your only paying $5.88 for a $1 annual income stream.

4 The P/E ratio may NOT be useful as it does not take Debt or Excess Cash into account. The EV/EBITDA ratio is a better. Enterprise Value Earning before Interest and Taxes (Daily) Enterprise Value = $2.44B EBITDA= $1.65B EV/EBITDA = 2.44÷ 1.65= 1.50 A great value long term buy.

5 Yield is the amount in cash that returns to the owners of a stock. Dividends are payments made by a corporation to shareholders. Dividend is never Profit ÷ Number of Shares as some or all of the profit may be reinvested Dividend Yield = Dividend Share Price x 100% Dividend 2010 = $0Dividend 2010 = $0.17 = x 100% = 3.62% p.a.