Chapter 11
Report Date: 02/01/01
Prepared By: Amanda Goodie
Some of the things that should be considered when evaluating the stock data to decide if the stock is truly growing:
1. Consistent record of growth in sales and earnings per share.
2. To help project the stock’s longevity consider the pre-tax profit margin, reflecting on the management skill in operating the company efficiently.
3. Another indication of the efficiency of management skills is the high return on stock holder's equity
4. A high rate of earnings plowback, permitting expansion financing with out dilution of present stockholders' interest.
5. Take in to consideration the how many established products or services of superior quality (with further potential) with in the company.
6. Is the management aggressive in developing new products and expansion?
7. What level of independence does the company have from the business cycle and other external influences such as government regulation (suggest relative independence)?
8. Look for companies that have a high projected growth rate in sales and earnings per share.
Some good practices to live by is to reports be discussed by the group, and reports be given in a set amount of time. This allows the club to have ample time to discuss the contents.
Obtaining five-year estimated earnings -
"Looking for the earnings per share trend line, add together five figures where the projected earnings trend line intersects the time lines. The result is total estimated EPS for the next five years. The closer the current stock market price is to the total, the more favorable is the price."
Industry Back Ground -
Take the time to look at the history of the company. Look at its growth, any management changes, buying of other companies, and any lawsuits, all of these things affect the stock and its price, and the companies futures sales.