Skip to content- Earnings Per Share (EPS) – That is how much earnings the company is producing per single share. For example if a company is earning £10 and have 10 shares outstanding that means the company have an EPS of £10/10 shares or that is 1£ per share = EPS of £1.
- Price to Earnings (P/E)– That is how much earnings a company is producing per single share. For example if a company have an EPS of £1 and a share price of £10 that means that their P/E is going to be 10/1 or 10.
- Price to Book Value (PB)– That is how much book value is there for a single share in a company. For example let’s say the company have a book value per share of 2. Their share price is £10. We can calculate that their P/B ratio is 10/2 or a P/B of 5.
- Price to Sales (P/S)– It is very similar to price to earnings, but instead of the earnings we use a company’s sales. For example if a company have £10 worth of sales and a share price of £50 that means the P/S will be 50/10 or 5.
- Price to Free Cash Flow (P/FCF)– It is a similar metric to P/E, but instead of earnings we use free cash flow. It is calculated byt dividing the current share price by the free cash flow generated per share. For example if a company have a share price of £50 and a FCF/share of £10 that means that the P/FCF is going to be 50/10 or P/FCF of 5.
- Book Value– That is how much assets are there on the company’s books minus its liabilities. For example if a company have £10 worth of assets and £8 worth of liabilites that makes their book value £10-£8 or a book value of 2.
- PEG (Price to Earnings Growth)- It is calculated by dividing the P/E by the expected earnings growth for the next year/s. Lets say a company have a PE of 10 and a growth rate of 10%. Then it will be 10/10 or the PEG =1.
- Stock Split– That is when a company decides to increase its share liquidity or reduce the current price of their shares. For example a company’s share price is £200 and decide they want to reduce it down. Then the company makes a 2/1 stock split and now the share price is £100. To do so and keep the market cap the company issues 1 new share to every shareholder so the value of the company doesn’t change. For example if you had 1 share of that company and they do a 2/1 stock split you now have 2 shares. So instead of having 1 share valued at £200 you now have 2 shares valued at £100 each.
- Reverse Stock Split– Basically the oposite of a stock split. For example instead of a 2/1 stock split they make a 1/2. That means that if you had two shares of a company valued at £100 each you now have 1 share valued at £200.
- Shares Outstanding– That is how many shares does a company have in circulation. Usually companies issue new shares as a way for funding projects, which increases the number of shares outstanding. Stock splits also increases the number of shares outstanding. Reverse stocks splits and share buybacks on the other hand decreases the numbers of shares in circulation.
- Share Buybacks– That is when a company decides to buy some of their shares back and reduce the number of shares outstanding. That boosts the company’s EPS as there are the same earnings, but less shares. That also gives bigger ownership % to the rest of the shareholders. Let’s say you have 1 share of a company with 100 shares in total. In other words you are 1% owner of the company. Now if they decide to buy 50 of their shares back that makes you a 1/50 or a 2% owner. You practically doubled your ownership in the company without the need to buy any more shares.
- Payout Ratio– That is what % of the net income is the company using to pay out dividends. It is calculated by dividing dividend per share by the dividend. For example if a company have an EPS of £10 and pays out a dividend of £2 then the pay our ratio will be 2/10 or 20%.
- Market Cap– Market cap stands for market capitalisation and shows us the total worth of a company. It is measured by adding up the value of all the shares outstanding. For example if a company have 50 shares outstanding and each of them is valued at £10 that means the market cap of the company is 50×10 or £500.
- Dividend– That is when a company decides to give cash back to their shareholders. They distribute some of their earnings and give it to the shareholders in the forms of dividends either once a year, twice a year, quarterly or monthly.
- Dividend declaration date– That is the date when the board of directors of a company decides it is going to declare dividends to the shareholders. In that date they also decide the size of the dividend aswell as the payment date.
- Ex- Dividend Date– This is the last day, by which you should be a shareholder in order to receive a dividend. If you buy the stock on the next day you are not eligible for the next dividend. Also if you sell the stock one day after the ex- dividend date you are still going to receive your dividend.
- Dividend Yield– This is simply what % of the stock price is paid out in dividends per year. For example if a stock’s price is £20 and is paying out £1 in dividends the yield is going to be 1/20 or 5%.
- Dividend Payment Date– This is the date on which the company pays out the dividend to their shareholders.
- Yield on Cost – This is how much your dividend yield is based on the price you have paid for a stock. For example let’s say you buy a stock worth $10. They distribute $0.50 in dividends every year. This makes your yield 5%. But the next 5 years the company grows. It is now a $20 stock with $1 in dividends. In other words the dividend yield is still 5%. But you bought the stock for $10 and you are still a shareholder. You are now receiving $1 in dividends every year, or 10%. Or that means your yield on cost is now 10%.
- Capital Expenditure(CapEx)– This is the money that a company uses to maintain and purchase physical assets. This can be a purchase of a new fleet of vans for example or the renovation of an office building etc.
- Free Cash Flow(FCF)- That is how much money a company is generating after they pay out their capital expenditures. Lets say a company have cash from operations of £50, but they have £20 of capital expenditures. That means that the free cash flow(FCF) is 50-20=£30 of FCF
- Entreprise Value(EV)- This is used to value the total worth of a company. It is calculated by summing up its total market cap+ their total debt- all the cash. For example if a company have a market cap of £100, debt of £50 and cash of £50 that means that their EV= 100+50-50 or the EV=100.
- Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)– It is calculated by adding back the interest, taxes, depreciation and amortization expenses to the net income. Lets say a company have a net income of £50, but they paid out for it 5£in interest, £5 in taxes, £5 in depreciation and £5 in amrotization. That means that their EBITDA is going to be 50+5+5+5+5 or EBITDA=70.
- EV/EBITDA– This is calculated by dividing the company’s EV by their EBITDA. Lets say a company have an EV of 10 and an EBITDA of 2. That means their EV/EBITDA is 10/2 or EV/EBITDA=5
