Fundamental stock analysis using financial metrics usually published alongside a stock price chart.
Let us go over the financial metrics that usually accompany a stock chart with Apple stock as an example from Yahoo Finance. Apple’s stock ticker is AAPL and is listed on Nasdaq, one of the two major stock markets in the U.S. Nasdaq lists many technology companies and uses a 4-letter ticker. Regular trading hours are from 9:30am to 4pm EST, while extended trading hours can last a few hours before and after the regular hours. The day’s closing price is listed along with the price during the extended trading hours. The Bid and Ask prices are the last sell and buy prices with the order quantity listed next to them.
The price range for the day and the year indicates how volatile the stock has been. Volume indicates how liquid a stock is. Typical volumes for highly liquid stocks are in their hundreds of thousands at the least. Market capitalization indicates how big the company is. It equals the stock price multiplied by the number of outstanding shares. The market caps for small, medium and large companies range from <$200M, $200M-$2B and >$2B respectively. In the case of Apple, the stock has been somewhat volatile in the last few months, as can be observed in the stock chart, and it is a highly liquid and mega cap company.
Beta is the risk measure of a stock in comparison to the market. Please read “Efficient Frontier and Diversification” to understand how Beta is measured. Market’s Beta is 1. Value and growth stocks have Beta values <1 and >1 respectively. P/E ratio TTM is the price-to-earnings ratio for the trailing twelve-month period. It indicates how pricey the stock is in comparison to its earnings. Value stocks have low P/E ratio compared to growth stocks. The S&P 500’s median P/E ratio is 15 (please refer to “S&P 500 Performance in the Last 50 Years” for other market financial metrics). Apple is a value stock that is less risker than the market and with a P/E ratio in line with the market.
EPS (Earnings Per Share) indicates how profitable a company is. It is the “bottom-line” number which is not only affected by the company’s operational efficiency but also by its capital structure (debt vs. equity). The revenue or the “top-line” number, on the other hand, is harder to manipulate and reflects true company growth, especially for start-ups. Mature (value) companies usually distribute dividends to its shareholders. The quarterly dividend amount, yield (% of share price) and dates are published. Apple is very profitable with a nice dividend yield.
Lastly, the 1-year target estimate is the average estimate provided by stock analysts. The analyst coverage shows their stock recommendations and their trend over the last 4 months. Apple stock is widely covered by the analysts who have become more bullish on the stock in the last month shown in the chart.
Our blog “Portfolio Tracker and Analyzer” reviews online tools to help manage your portfolio better.
We specialize in tax-free retirement strategy and investments such as IUL, Annuity and LTC. Prefer a quick and complimentary consultation? Just email us at Karthik@FinCrafters.com
