Learn the basic Stock Quotes (Part-2) terminology by using Money Control App.
Hello readers, in our previous article we have learned about the stock quotes with the help of a money control app. The 1st part of this series of stock quotes was mostly related to the traders. If you are new or you have not yet read the first part of stock quotes; please click the below link before continue with this new article.
How big the company is or the company is strong in its financials or not? Is the company good to invest in or not? This second part will help you to clear your mind. With this article, you will understand and can make your decision to learn more about the company.
STOCK QUOTES - STATISTICS
When you scroll down in your mobile phone app, you will see the statistics of Reliance. Where they have shared their standalone and consolidated data. Under statistics, you will see the following stock quotes:
- Mkt. Cap (Cr.)
- EPS (TTM)
- The dividend (%)
- Yield (%)
- Face Value (Rs.)
- Book Value (Rs.)
- Industry P/E
- Deliverables (%)
Consolidated data means the collaborated data of parent company along with its subsidiaries, associated companies, and Joint ventures.
Whereas in standalone data, only parent company data is available. There is no financial data of subsidiaries, associated companies, or any Joint Venture.
It is the market capitalization of the company. It tells us about the size of the company whether the company is small or big.
Reliance has a market capitalization of ₹995,539.91Cr. The market capitalization depends upon the market price (share price). And the market prices change every time, so the market capitalization. Some people have the misconception that; the share with the highest price is the biggest company. But this is not true. Any company is big or not it depends upon the market capitalization, not on the share price.
Recently, Reliance is the only company in India who touches the market capitalization of Ten Lac crore and become India’s Biggest Company.
Furthermore, market capitalization categorizes into three categories: small-cap, mid-cap, and large-cap companies.
Depend upon the company’s market capital it segregated into these categories only.
EPS stands for Earning per share. It indicates, if the company divide its full profit to their shareholders, then for one share, the shareholder will get how much money.
For Reliance, the EPS is 45.7 and if Reliance divides its full profit to its shareholders then, the shareholder will get ₹45.7 for each share they have in their portfolio.
In the bracket with EPS, TTM has been mentioned. It means trailing twelve months (the last 12 months EPS value). The company shares its financial results every three months. They share collaborated data of all four quarters become the data of 12 months or 1year. The use of EPS is to calculate the P/E ratio.
It stands for the price to earnings ratio. It helps us to know that, is the share price of a company is overvalued or undervalued compared with its profit or income. This can be calculated as
P/E = Share Price/EPS
Now, check for Reliance industries, the share price is ₹1472.25 and its EPS is 45.7.
So, P/E = 1472.25/45.7 = 32.21
If you want to know that the P/E value of Reliance is more or less you can compare its P/E with its peers’ companies or competitors.
P/E value of Reliance is 32.21, it means for ₹1/- a profit of Reliance; investors are ready to give ₹32/-. For any company, if P/E is more that means investors are optimistic about the company’s future growth. But in a Bull Run market, everybody is optimistic & the P/E value of a company always on the higher side.
If any company P/E ratio is less, it indicates the investors are not confident about the company’s future growth.
Always remember, you cannot compare two different sectors company P/E. If you do that, you cannot judge the future growth or the company valuation properly. For a better understanding of P/E always compare with the same sector companies.
In simple terms, book value is that value, when any company is going to shut its operations fully, then the company must sell its assets. And then from that asset value, they must pay their liabilities.
After paying their liabilities the remaining value is the book value of the company. Book value can be calculated as
Book Value = Total Assets – Total Liabilities
If you look at the book value per share, then you have to divide the book value of the company with its total no. of shares outstanding. This can be calculated as
Book Value/Share = Book Value/ Total no. of outstanding
In the case of Reliance, the book value per share is ₹706.46/-. It means if Reliance closes their operations, sell their assets, and pay their liabilities then the shareholders will get ₹706.46/- per share, they have in their portfolio.
It is the valuation ratio that helps us to know, is the company share price has underpriced or overpriced. It can be calculated as:
P/B = Share price/Book Value
If the P/B ratio >1, which means for ₹1/- a profit of company; investors are ready to pay more.
In the case of Reliance, it’s P/B ratio is 2 that means investors are ready to pay ₹2/- for ₹1/- a profit of a Reliance. It also clear with its share price which is ₹1472.25/- and its book value is ₹704.46/-
P/B = 1472.25/704.46 = 2.08
If the P/B ratio <1, which means for ₹1/- a profit of the company, investors are not confident and only pay less for ₹1/- for their profit.
Always remember the P/B ratio can only be used for manufacturing companies, Automobile, engineering companies, or Asset heavy companies.
DIVIDEND, DIVIDEND YIELD, AND FACE VALUE
Sometimes, company share their profit with shareholders and give some value against their share have in their portfolio. That value is the dividend. The decision for giving the dividend is totally in the hand with the company management or board of directors. Company management will decide whether the dividend is needed to pay or not.
Some growing companies will not share their profits in terms of dividends with shareholders. They generally use that money to grow their businesses.
If a company is giving dividends to shareholders, it is the goodwill amount that the shareholder gets in their bank accounts. It is always suggested that if you are investing, invest in the company that is giving dividends to their shareholders.
The dividend is calculated on the face value of the company. When a company issues their shares they decided their face value which is the nominal value. The face value of any company is would be 1, 2, 5, or 10 only.
Now, in the case of Reliance, the face value is ₹10/- and the dividend is 65%.
So, Dividend = 10*65% = ₹6.5/-
That means Reliance is giving ₹6.5/- per share to their shareholders.
Dividend yield means, how much dividend is giving by the company to their shareholders against their share price. This can be calculated as:
Dividend Yield = (Dividend per share/Share price) x 100
To check dividend yield for Reliance, its share price is ₹1472.25, and the dividend is 6.5/-. Its dividend yield can be calculated as:
Dividend yield (Reliance) = (6.5/1472.25)*100 = 0.44%
This dividend yield clears that for every ₹100/- investment by the investor, Reliance is giving 44paisa to their shareholders.
Now, we know about what is P/E (Price to earnings ratio). What we learn above was P/E for the company only. But the industry P/E is nothing just the average of the same sector companies P/E.
In the stock market, shares are sold or purchase all day. If somebody purchases the share and sell the same shares on the same day that is called intraday trading. Whereas, if anybody purchases the share & does not sell on the same day that is called delivery. In stock quote (part -1 article) we have studied the volume of the shares sell or purchase. That volume is the total of intraday trading and the delivery shares.
Now, if you are a new investor or already have little information about the stock market but do not able to make your decision to enter or not. These two articles (Stock Quotes part-1&2) will help you to under the basic stock market terminology. This information helps you to know about the company’s financials and market valuations.
With this information, you can easily make your decision to study more about the company. Always remember, with this information only, you cannot decide whether the company is good or bad for investment. There are lots of lots of other information required to make a final decision for investment. Always do investment in strong fundamental companies only.