Who is Your Stock?

Each of the bold terms found below are items you would see in a stocks profile. Experts use these numbers to determine value, risk, and overall strength. You should start using these to get a better grasp on your stocks true potential. Answer each of the questions using a different color. Historically speaking, what would be a safe RETURN ON INVESTMENT (ROI) to watch for when researching? What does the P/E Ratio represent? The Price-Earnings ratio is represented by: current price of stock/ earnings per share It is a tool for comparing companies within an industry. A high P/E ratio means that the company has room for growth. A Low P/E ratio means that the company is handing out large dividends in proportion to the stock price. P/E ratio is used to help predict the growth of a company based on comparisons from the rest of the industry said company belongs in.

What is a safe P/E Ratio to pay attention to? -Ratios of 15-20 are considered safe. Bargains are those that go for under 15 What is Market Cap (Capitalization)? What does that number represent? -This number represents the total value of the companies stock at a given time. - It is calculated by multiplying the number of stocks by the current market price. What does the Beta mean? Why should you know? It is a measurement for risk in comparison to the stock market. A if a company has a Beta of 1, then it is just as volatile as the market. If it has a 1.3 Beta, then it is 30% more volatile than the market. One might use this statistic to determining whether to invest in a given company or not, depending on the risk one is willing to take.

Whats an ideal Beta for a young, somewhat inexperienced investor like yourself? I would guess that it really depends on your situation. If you are an investor that wants to play it safe and make some money in the long run or if you are like us and have a few weeks to make some bucks with risky companies. If you want to invest and have your portfolio composed mainly out of income stocks, then you probably dont want a beta of more than 0.70 If you are confident and think you can take on the role of a Wallstreet-guy then you will go for stocks maybe ranging from 0.90-1.60 But if you are one with the get rich or die trying mentality then you want to go for stocks that have a higher beta. Companies starting out may not have an ideal beta, but they are the ones that can potentially make you lots of money. If you are a noobie investor, chances are, you will loose your money. To conclude, investors starting out, should stick with stocks that have betas of <1.

What does Earning per Share (EPS) represent? How could this help you? This is the portion of money that a company allocates to each stock during the dividend period based on its profits. - The equation for it goes as follows: Net income- Dividends on preferred Stock/ Average Outstanding Shares.