14 Essential Things to Know about a Company Share
Reading the financial pages lets you stay ahead of the game when it comes to making decisions on you share portfolio. Before deciding whether or not to buy a share in a company, you need to know the following basic information:
The share’s TIDM: The identifier code used by the Stock Exchange (which used to be called its EPIC)
The share’s price: This will probably be expressed in pence (GBX) or pounds (GBP)
The company’s market capitalisation: This is the company’s current share price, multiplied by the number of shares currently in circulation
The share’s price/earnings ratio (if any): All things being equal, the higher the p/e is, the more optimistic the market’s expectations are. Make sure you know whether it’s a historical or a forward (predicted) figure. Trailing twelve months (TTM) is usually the most reliable measure if you can get it.
The company’s earnings per share: This is its pre-tax profit figure (ideally historical), divided by the number of shares in circulation.
The share’s dividend yield: Expressed as a percentage of its current share price.
The company’s dividend cover: That’s the company’s last dividend payment, divided into its pre-tax profits. A figure of 2 is good. Less than 1 may spell trouble.
The share’s ex-dividend date: Share prices will often drop as soon as the dividend is in the bag and people sell their shares, so don’t be deceived by the fall because it usually means nothing.
The company’s revenue: Also known sometimes as income, or just turnover. Rising or falling?
The company’s operating profit: Turnover from routine activities, minus operating costs.
The company’s EBITDA: Earnings before interest, tax, depreciation and amortisation. A crude measure of operating profit, which disregards the costs of paying debts and of owning depreciating assets. Popular among analysts, but not a formally accepted formula.
The company’s debts: Are they bigger than its assets?
The share’s price to book value (PTBV): This is the current share price divided by the net asset value (NAV) per share. Or, if you prefer, the market capitalisation of the company divided by its total net assets. It tells you how the company’s share price relates to the amount that might be got if it ever had to sell up.
The company’s free float: Expressed as a percentage figure. This is a rough measure of how many of a company’s shares are available on the free market - as distinct from being held by ‘tied’ investors who are unlikely ever to sell. Can be critical in determining how big a weighting the company gets in a stock market index.