Price of the Company: An investor needs to research on the ‘Market Capitalization’ of the company, he is planning to invest in. It refers to the price of all outstanding shares of a company multiplied by the quoted price per share, at any given point of time. It is the ratio of a company’s current share price to its earnings per share.
Investment Policy of the Investor: An investor needs to have valid reasons for investing in a particular enterprise. An investor needs to select a good company that requires him to pay the minimum possible amount.
Investors need not invest a lump sum amount in a stock all at once. Since an investor puts in the same amount of money, he can purchase more shares when the prices are lower. This basically lowers an investor’s average cost per share in comparison to the average market price per share, in the same time period.
P/E Ratio = Market Value per Share
Earnings per Share (EPS).
Long Term Goals of the Investor: Investment involves risk but intelligent planning of long-term goals makes investing safe. An investor needs to select a good company that requires him to pay the minimum possible amount. He should consider the ‘Dollar-cost Averaging Program’.
Is The Company Buying Back Shares: It is very important for investors to observe the per-share growth of a company. A company may not show considerable growth in sales, profit and revenue for a few consecutive years, but could generate large returns for investors by dropping the total number of outstanding shares.
Investment Policy of the Investor: An investor needs to have valid reasons for investing in a particular enterprise. Investment decisions should be solely based on the authenticity of a company. Authenticity, here involves the reputation of the company, its management, profits earned, market cap and other such fundamentals, related to economics and finance.
Investment involves staking capital in an enterprise, with the expectation of profit. In order for money to grow, investors need to invest judiciously.
Example: If a company is trading at $50 per share and earnings per share over the last 1 year were $ 2 per share, then, P/E ratio for this company’s stocks would be $50/$ 2, that is, $25. High P/E value indicates that the company has high growth prospects in the future.
Reinvesting the dividends, to grow over a long period of time, often proves highly profitable. An investor should look for all valid essentials of an investment before investing.
P/E ratio can be used to make important investment decisions, by comparing P/E values of various companies.
Price of the Company: An investor needs to research on the ‘Market Capitalization’ of the company, he is planning to invest in. It refers to the price of all outstanding shares of a company multiplied by the quoted price per share, at any given point of time. It is the ratio of a company’s current share price to its earnings per share.
