Fundamental Analysis

Paid off in dividends

The term “dividend” refers to the amount paid out of a company’s profits to its shareholders. In Australia it is common practice to pay both an interim and a final dividend. Earnings not distributed in the form of dividends are retained in the business and help it to grow. They still belong to the shareholders…

What is the price/earnings ratio of the overall market?

By Nick Renton AM Share investors are no doubt familiar with the concept of the price/earnings ratio for an individual stock. This ratio is defined as the market price of a share expressed in cents divided by the earnings per share also expressed in cents. The ratio can be described as the number of years’…

The best stock in the market – stock screening software and how to use it

For investors who favour a fundamental approach to investing, there is plenty of help available from software programs that crunch the numbers they need – digesting and comparing companies’ reported sales revenue, cash flow, earnings, dividends, assets and liabilities. Programs such as Stock Doctor, Conscious Investor, Value Gain, Bourse Data and MetaMarket+ have made it…

Guide to analysing stocks – part 1

Academics and researchers have spent considerable time searching for the secret to making it rich on the sharemarket. The trouble for investors is that – when every supposed ‘expert’ yells from the rooftops proclaiming the secret to successful stock investing – it’s almost impossible to separate the researched theory from the pure sales pitch. For…

Guide to analysing stocks – Part 3

Just one month before the scandalous US energy firm Enron was busted for accounting fraud in late 2001, of the 15 most highly influential company analysts in the US, 13 analysts recommended the stock as a “buy” or “strong buy”, while just two labelled it as a “hold” or “sell”. It’s understandable, therefore, that investors…

Measuring the strength of the Australian sharemarket

Most agree that the major ingredients required to herald a sharemarket crash are investor euphoria combined with an overvalued sharemarket; like a pressure cooker, as prices for stocks soar upwards, a market becomes overheated and the likelihood of a market crash is ever more present. Last week we looked at the fundamental reasons for why…

Top financials to know about a company

A cynic was on the right track when he claimed, “The sumptuousness of a company’s annual report is in inverse proportion to its profitability that year.”  Investors contemplating the purchase of shares in a specific listed company can get hold of its latest annual report – either in hard copy by requesting a copy from…

Use these 5 ratios to unearth superior stocks

We all want to find the next Rio Tinto, but long before it’s trading at $100 a share, or Google when it was a tiny IT company with only a vision. But how do we know that a company will be a superior player over the long haul? What key ratios unlock the secret to…