thanks for the postings, chong. I also commented as follows previously. <Blog: MyFirstPortfolio Which stock to sell and what to keep? kcchongnz Dec 27, 2015 07:10 PM | Report Abuse
At the end of the day, big money is made by buying small cap stocks with low PE and gets re rated because of increasing quarterly profits.
Ratios hardly help in this respect.....but insider information and deep understanding of the company and its environment will do the trick.
Even simple rations have too many factors behind it to use to predict the future.
Blog: MyFirstPortfolio Which stock to sell and what to keep? kcchongnz Dec 27, 2015 06:47 PM | Report Abuse
Thanks for the education. This web site is incomplete without you.
But I must say every ratio starts from the audited accounts....and you already know what they can do to audited accounts.
Other gurus put emphasis on other non quantifiable things such as.....business model, management, ....shareholder strengths, relationships, concept stocks. Etc etc....and this year earnings, latest q earnings. PE ratio.>
I also an accountant so I appreciate people like you who promotes financial ratios. It is not my intention to be anti Chong....the purpose of my comment is to say ratios is only part of the story....it is historical, it can be manipulated, and limited predictive power in relation to share price which we are all in it for.
I like to look at a share as consisting of 3 components...the business model, the management and the numbers. Ratios do assist in answering specific questions in relation to the 3 factors above....And only that. Ratios help to answer very specific and very limited questions. Ratios also help in selecting the best from a similar industry and similar operating environment by doing some comparisons within the same industry. Comparing Ebita yield eleminates the effects of borrowings and depreciation and focuses on the enterprise value of companies in the same industry. Earnings yield as defined by you as Ebita divided by market cap plus borrowings introduces share price into the equation which is good and gives additional information so, you see, I am not anti Chong. Ratio is a financial tool, it is just a tool. But the best buys are those companies with a good business model, good management and good figures. and you can buy it at a decent price....or in the words of KYY, profits increasing Q by Q and still below PE 10.
No need waste time here kc! Ppl here only wanna get tips, follow syndicate goreng, and also get Max margin to punt. Why waste time with these ppl? It is like you going genting casino, asking those dou zai, uncle auntie quit gambling! U will kena xxxx kao kao later.
I will focus less on the ratios and more on valuations. eg, some of your previous writings about valuations, appropriate PEs, growth, discounting rates, terminal values, what PE for what growth rates...these are very illuminating.
a simple rule of thumb...a 25% growth rate company can easily justify 25X PE once we are comfortable with the projections.
at i3, Kcc's and a few writing are worth reading all, i hope he wrong bit more on ROIC = Ebit/Invested capital and also EV/ FCF or ebit/EV, stil learning. Some ppl wil just nvr get it, shocks me to learn that even someone with accounting says thing with gongchart brain. "let me tell u 3 words that wil make u very rich, rmbr free cash flow"- Warrren edward buffett
HAHAHAHAHAH ... HAHAHAHAH ... newbies quarelling with each other about useless things ... HAHAHAHAHAH ... but hey ! It is a learning process. At the end ... u may learn something .... "that somethng could be more harmful than before u learn that something" ~ quoted by leno the most panlai .... HAHAHAHAHAH .... scary but truthful right ?
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....