INVESTING STRATAGIES - Financial Ratios

Company Refs Ratios.

Earnings per Share
EPS = Company Earnings / No of shares

EPS Growth Rate
The EPS Growth Rate indicates the predicted rate of increase
(or decrease) of earnings per share, using brokers forecasts.
EPS Growth Rate is calculated as:
EPS Growth Rate = (Future Predicted EPS - Current EPS)/ Current EPS

Market Capitalisation
Market Capitalisation is the total value of a company if the value
of all its shares were added up. Market Capitalisation is calculated as:
Market Capitalisation = Share Price * No Of Shares

PEG (Price-Earnings Growth factor)
The PEG is used to calculate how much future predicted future share
growth has already been built into a share price. The lower the PEG,
the less future growth is already in the share price. REFS give a
company a PEG when:
• There are brokers forecasts
• EPS growth is seen in 4 consecutive years (including future years)
• There has been no profit loss in the last 5 years
PEG is calculated as: PEG = PE / EPS Growth rate

Dividend Yield
The Dividend Yield represents the annual dividend per share as a
percentage the share price. Dividend Yield is calculated as:
Dividend Yield = Dividend per Share / Share Price

Cash Flow
Cash Flow represents the volume of cash generated by a business
from which the dividend must be paid. Cash Flow is calculated as:
Cash Flow = Operating profit + Returns on Investment - Interest Paid -
Dividend to Preference Share and Minority Holders - Tax Paid

Shareholders Funds
Shareholders Funds are calculated as:
Shareholders Funds = Ordinary Share Capital + Preference Share Capital
+ Reserves

Net Gearing
Net Gearing indicates how much a company is in debt relative to
shareholders funds. Net Gearing is calculated as:
Net Gearing = (Total Borrowings - Cash and Near Cash Assets) / Shareholders Funds

Relative Strength
Relative Strength shows how well the share price has performed relative
to the FTSE All- Share Index. It is said that on balance, shares that
win continue to win. Relative Strength is calculated as:
Relative Strength = Gain in Share price / Gain in FTSE All Share Index.