my fellow landers, I am a JJC in world of shares.
I wanted to buy some so somebody advise me to first have a CSCS account, on getting to a stock broking firm I was told that one most have 300thousnd naira o shares worth that amount n I don't ve either.

please advise me, thank you.


babylov, thats der own standard, but u must also no dat d sun
dos not shine at d whole world @ d same time wt d same ray
chek oda SB firms some may accept less dan dat.

head on to www. NAIRALANDERS .com

its dedicated to investment clubs
stocks and general business

Re: Stock Market: Questions And Answers
« #65 on: October 05, 2007, 12:41 PM » 

-------------------------------------------------------------------------------
Go to another stockbroker that will charge lower

thanks everyone,

i have followed the analysis on this thread but no one had mention the importance of EPS and Diluted EPS. what is the difference and how do you calculate Diluted EPS, Diluted DPS etc.

i want to buy fedility bank offer and i will like to know if it is a good buy before i go ahead

@WOODBOI

This is my personal opinion. I initialy felt that fidelity bank share would be good until I read about the fidelity GDR offer. I have a feeling that the GDR offer will greatly dilute the shares (as seen in GTB GDR offer).

So, my take is fidelity offer might not perform in a short or mredium term, but probably in the long term. I stand to be corrected though

@demmyqueen

have followed the analysis on this thread but no one had mention the importance of EPS and Diluted EPS. what is the difference and how do you calculate Diluted EPS, Diluted DPS etc.

I'm interested in that your question as well. I hope a guru in the house will do justice to it using a purely lay-man statement for better understanding.

Pls i need a good stockbroker who stays in port harcourt recomended to me. I want to start investing my small cash in trading shares and stocks in the NSE. I need one who knows the market and can take decision fast, and also carry out orders fast without delay. I ned one who can be my guide. Pls i need help on this. Thanks.

babaife.i appriciate your contribution to this forum.pls i am a novice trader and i have a little idea of trading on stock.i have 5000naira now whicch i will lyk to invest with.pls give me a very good share dat i can buy wit this money.which i will lyk to sell in nextyears 1st quaters. thanks

pls i need someone to enlighten me on how i will go investing my 5000 naira on the market floor.

@ ceceters

How much do you have to invest?

MT,let me bail u out.the 50k simply is the money u are entitled to get if in case the company liquidates.that means ur share value if it is 17.50k would amount to 50k.

Hi otokx,
R u a stockbroker?,
do u reside in PH?,
I av like say 100k to invest.

@ ceceters

my stockbroker in Port Harcourt requires a minimum of 50k with 2 Passport Photographs and photocopies of drivers license and a utility bill. It is assumed that You have a current account and you will need a signature verification form from your bank.

plss i still need a reply on which equity i will invest my 5000 naira on and which will make me anice profit
plssssssssssssssssssssssssssssssssssssssssssssss

Diluted EPS or DPS

Diluted EPS or DPS is calculated by factoring in additional shares of the company that are due to be listed or for instance new shares due to bonus issue. This will bring down the EPS and DPS values since the division of earnings or dividends is now done with a larger number of total outstanding shares.

Quote
hi again mt, u see ratio is all about comparison. PE ratio means price earning ratio, by definition it is regarded as an indicator of future performance, that is if u follow the trend. to derive PE ratio u dvide the market price by the EPS, the actual comparisom is between the market price and EPs, so if the mps is 100 and the eps is 20, that coy is not dong well as the margin is way too high.The market is more or less the benchmark if the market price is a certain figure, your coys EPS should be close to the market price, and from this i.e MPS and EPS we derive the Price earning ratio.

if you look at the trend and a coys PE ratio is low continously for a period u can determine where the coy is going, u cannot seperate EPS and PE ratio, if your EPS is low it will affect your PE ratio and vice versa, low and high EPS And PEratio is however relative i.e to the asking price in the market i.e MPS
End Quote
------------------------------------------------
I disagree with part of the analysis above.

A stock with a price of 100 Naira that earns 20 Naira per stock is an excellent stock ignoring all other factors. This translates to a PE of 5!!! I don't know any stock that is achieving this anywhere in the world at that. Most stocks on the NSE have PE of between 15 and 50. 5 Ke? Based on what we have now a stock that costs 100 Naira will have an EPS that is less than 8 Naira.

The higher your EPS the better but it will never be anywhere close to the price of the stock. The PE is a measure of how many years it will take you to recoup your investment from buying a stock. Expect EPS that is around 8% or less of the price of the stock.

Enjoy.

Pumping

MT:



I understand summarily from Buttyelele's post that :

- the MPS (Market Price ) is the relative bench mark to the EPS and PE

- IF the PE of a company is too low continuosly over a period of time, then the company is not doing well

- If the gap between the EPS and the MPS is too wide, then the share is not regarded as being ok


Now the twist is this, according to the principle of mathematics,

since PE = MPS divided by EPS , therefore, in order to get a high value for PE then EPS MUST be low (ie the denominator must be very low comared to the numerator before very high value could be gotten. For instance 10 divided by 5 will give you 2 while 10 divided by 2 will give u 5)

What I'm driving at is that , I think there's a bit of contradiction because if we want the PE to be high (which indicates good performance), then I think the EPS has to be really lower compared to the MPS, and this again indicates wide margin between the EPS and MPS which in turn lead to non-performance.

It's logical and seems contradictory ( my own thought ooo)if carefully followed. Please can you make clarifications on this logic?

----------------------

I believe there is some misunderstanding here and you got this by identifying the contradiction above.

1. The PE ratio should be as low a possible!!! PE is Price divided by earnings. We want price to be low and earnings high. This gives us a low number which is very desirable. More returns for less investment.

2. There is no need measuring the gap between the stock Price and EPS. Use the PE ratio instead. You want this be as low a possible but be realistic and know that the PE of most companies will be higher than 15. This is the relative ratio that allows the comparison of different stocks because the price is factored in reviewing the earnings.

Enjoy.

Pumping.

@ otokx

So who is ur broker?
And whats there address?
Though i dont have a current account. what can be done about that?

Pls reply. Thanks

@Pumping,

Thats a throurough educative one from you. You got it spot on. Thanks cos someone is enlightened here

I thak the contributor of this topic.
I want to know if it is possible to be involved in the business of buying and selling of shares effectively without the guidance of a broker. If it is , How can one go about it.
Thanks.

@ pumping

i think we are missing something here. while i appreciate the individual nature and strategy of each investor, i beg to disagree with the position of pumping on the following grounds:

a) the PE ratio of any company should not be too low as canvassed by pumping. your PE should be maximised to the best possible level. this is important because, the ONLY way to determine the growth of shareholders investment is MARKET VALUE of their shares. also management efficiency is measured by how strong its PE ratio.

Simply put, the share price in an efficient market is determined by combination of factors- high earnings, growth rate, dividends policy, management team experience, high rate of return, strong internal control system among others.

therefore, if the PE ratio is low, the company risks being acquired by a stronger company because it it perceived as BEING WEAK. a case in hand was the hostile romance advance made by access bank to afribank sometime in january 2007.

having said that, if you discover a company with a WEAK or LOW PE ratio, please buy because the PE may rise in future. however, if you hold an investment in a company whose PE is nosediving, it means something drastic is required as it portends a BAD OMEN.

@ babaife
pls i will like to reply me about the investment i told you.plz i really need a urgent reply and better understanding.

Oceanic has not started distributing certificates but the should start any moment from now. Insider source reports that they have paid the issuing houses the cost of printing and distributing the certs. already.

madeonline:

Oceanic has not started distributing certificates but the should start any moment from now. Insider source reports that they have paid the issuing houses the cost of printing and distributing the certs. already.

I don't think its the issuing house that prints and distibutes certificates. Isn't that the job of the registrar. (i stand to be corrected!!!!!!!!!!!!!)

@ gurus

Is there anyone who can clearly distinguish for me the following capital market operators- Broker/Dealer, Sub-broker and jobber. Thanks

baba .y.:

@ gurus

Is there anyone who can clearly distinguish for me the following capital market operators- Broker/Dealer, Sub-broker and jobber. Thanks

Broker/dealer - synonyms (they mean the same thing)

sub-broker is simply like an agent to a broker

jobbers - the old name that brokers used to be called but now used mainly for the likes of sub-brokers

madeonline:

Oceanic has not started distributing certificates but the should start any moment from now. Insider source reports that they have paid the issuing houses the cost of printing and distributing the certs. already.

i think oceanic registrar is leading the way into e-certs and e-bonuses. i suspect they will save themselves a lot of money by crediting the CSCS account of subscribers who have a CSCS number and provided the info on the form. so you might not receive a cert if you have provided ur CSCS acct number, you will only get a letter informing you that your CSCS acct has been credited wit the shares alloted to you

i got my last oceanic 1-for-4 bonus credited directly to my CSCS acct by oceanic registrar

Insurance companies share prices are low. are they value stock? that is are they undervalued or the market is being unfair to the sector? though their consolidation plan appears to be hitting the rock coutesy various litigation among the players, i do not expect their stocks to be so undervalued.

babaife:

@ pumping

i think we are missing something here. while i appreciate the individual nature and strategy of each investor, i beg to disagree with the position of pumping on the following grounds:

a) the PE ratio of any company should not be too low as canvassed by pumping. your PE should be maximised to the best possible level. this is important because, the ONLY way to determine the growth of shareholders investment is MARKET VALUE of their shares. also management efficiency is measured by how strong its PE ratio.

Simply put, the share price in an efficient market is determined by combination of factors- high earnings, growth rate, dividends policy, management team experience, high rate of return, strong internal control system among others.

therefore, if the PE ratio is low, the company risks being acquired by a stronger company because it it perceived as BEING WEAK. a case in hand was the hostile romance advance made by access bank to afribank sometime in january 2007.

having said that, if you discover a company with a WEAK or LOW PE ratio, please buy because the PE may rise in future. however, if you hold an investment in a company whose PE is nosediving, it means something drastic is required as it portends a BAD OMEN.

I think you have really missed the point. For an investor, the lower the projected PE of a company compared to others in the SAME sector, the better, provided the company has not cooked it's books. You are looking at the sentimental position of the Executives and Management of the company. Agreed PE cannot be used in isolation of course.

The arguement about possible takeover does not apply here. Takeovers in most cases will increase the value of a company. This could be a problem for the Executives and Management of the company who do not want to give up ownership but definitely not for the shareholders because they will end up being offered the fair value of their stocks. It could be an issue whereby the new owners decide to delist the company but that is a different story. The net result of a takeover for investors is the realization of the future benefit of a company before it is due.

If Afribank is acquired by Access bank how is this a loss to the investors? The investors will have to be offered a fair value for their shares. This is in fact a very desirable position for any investor to be. Look at Standard bank and IBTC saga. Have investors lost out? Low PE or not, many companies are still being acquired. Even with a high PE a company is easy to acquire if the total value (capitalization) is low. In other words, being a small company, buying it is affordable for those that think they can do better with it (Ability to generate an even lower PE based on current prices).

And what do you mean by saying the PE of a company is nose-diving? Nose diving is a negative term for something undesirable and should not be used for PE.  PE could be falling because the price of the stock is crashing due to maybe some negative news that could impact the returns of the company in future. However, in this case, the projected income will be adjusted to reflect a more realistic PE.

It is like saying the expenses or debts of a company is nose-diving. Is this not desired? 

Having a low PE ratio does not imply that a company is WEAK. It simply means that it is likely to be undervalued and it could also be a target for investors which will eventually increase the price due to bargain hunters.  If the projected PE of Zenith banks drops to 10, tell me wether the price will not rise or someone will not try to acquire it. Either of these will  benefit the current owners of the stock.

Hi Walcolm and Babaife,

What do you guys have to say as per African Paint Plc. and Standard Insurance Plc?.

Peace.

@ pumping

Could you please Give me one or two penny stocks that has Good PE and potential for future growth. It will be appreciated

@ Pumping
I think you have really missed the point. For an investor, the lower the projected PE of a company compared to others in the SAME sector, the better, provided the company has not cooked it's books. You are looking at the sentimental position of the Executives and Management of the company. Agreed PE cannot be used in isolation of course.

well, i believe our opinions differ because of our individual investment strategy and instinct. we saw the issue from " a buyer" and "a seller" point of view.

The arguement about possible takeover does not apply here. Takeovers in most cases will increase the value of a company. This could be a problem for the Executives and Management of the company who do not want to give up ownership but definitely not for the shareholders because they will end up being offered the fair value of their stocks. It could be an issue whereby the new owners decide to delist the company but that is a different story. The net result of a takeover for investors is the realization of the future benefit of a company before it is due.

I must say without ant fear of contradiction that NOT ALL ACQUISITION INCREASE THE SHAREHOLDERS WEALTH. In reality, the essence of due diligence is to ensure that a party to the acquisition is not a liability to the other. also both the targeted company and the acquirer must contact or appoint FINANCIAL CONSULTANTS to study the offer and ensure that the SHAREHOLDERS WEALTH will be increased else the deal is put off. we were all living witnesses how GULF BANK could not merge with the intercontinental group.

If Afribank is acquired by Access bank how is this a loss to the investors? The investors will have to be offered a fair value for their shares. This is in fact a very desirable position for any investor to be. Look at Standard bank and IBTC saga. Have investors lost out? Low PE or not, many companies are still being acquired. Even with a high PE a company is easy to acquire if the total value (capitalization) is low. In other words, being a small company, buying it is affordable for those that think they can do better with it (Ability to generate an even lower PE based on current prices).

it is also known practically that company's with lower PE than it competitors are good for any wealthy and healthy competitor to acquire. the assumption is that the management is NOT EFFICIENT ENOUGH to ginger the share price of such companies, hence under a new and efficient management team, the share price may go up and ultimately increases the PE. a company with a low PE is referred to as VALUE STOCK. all other things being equal, such company should have the ability to operate for the unforseeable future. @ pumping is an individual with an instinct to "acquire" companies with low PE. This is acceptable ONLY IF SUCH COMPANIES HAVE THE POTENTIAL TO GROW, ELSE THE INVESTMENT IS LOST

And what do you mean by saying the PE of a company is nose-diving? Nose diving is a negative term for something undesirable and should not be used for PE. PE could be falling because the price of the stock is crashing due to maybe some negative news that could impact the returns of the company in future. However, in this case, the projected income will be adjusted to reflect a more realistic PE.

Nose diving is a term is the most appropriate words when you hold a share whose PE continues to reduce in value. for instance, you bought a share when the PE is 20, any the last 3 quarterly results shows a PE of 15, 10, and 5. i ask what should an investor do? hold the shares till the PE becomes 2? you have to sell. the reduction in PE may be due to accurate information being made available in the market. How i wish i could explain better on CREATIVE ACCOUNTING and its EFFECTS on SHARE PRICE. A topic for another day

It is like saying the expenses or debts of a company is nose-diving. Is this not desired?

when expenses and debts nose dive, it is HIGHLY DESIRABLE because the effect is that earnings increase, share price increase, confidence in the management increases and ULTIMATELY, PE INCREASES

Having a low PE ratio does not imply that a company is WEAK. It simply means that it is likely to be undervalued and it could also be a target for investors which will eventually increase the price due to bargain hunters. If the projected PE of Zenith banks drops to 10, tell me wether the price will not rise or someone will not try to acquire it. Either of these will benefit the current owners of the stock.
A Weak or Low PE is a value stock. it is one of the criteria to adjudge the efficiency of the management team. investors WANT TO BUY SHARES WITH LOW PE THAT HAVE THE ABILITY TO GROW OVER TIME, BUT DO NOT WANT TO SEE THEIR SHARES PE DROP. or what is the point in buying a share whose PE is likely to drop?[quote][/quote]

babaife:


Nose diving is a term is the most appropriate words when you hold a share whose PE continues to reduce in value. for instance, you bought a share when the PE is 20, any the last 3 quarterly results shows a PE of 15, 10, and 5. i ask what should an investor do? hold the shares till the PE becomes 2? you have to sell. the reduction in PE may be due to accurate information being made available in the market. How i wish i could explain better on CREATIVE ACCOUNTING and its EFFECTS on SHARE PRICE. A topic for another day

when expenses and debts nose dive, it is HIGHLY DESIRABLE because the effect is that earnings increase, share price increase, confidence in the management increases and ULTIMATELY, PE INCREASES

A Weak or Low PE is a value stock. it is one of the criteria to adjudge the efficiency of the management team. investors WANT TO BUY SHARES WITH LOW PE THAT HAVE THE ABILITY TO GROW OVER TIME, BUT DO NOT WANT TO SEE THEIR SHARES PE DROP. or what is the point in buying a share whose PE is likely to drop?

I'm confused (very confused).  Why wouldn't you want your PE to drop? (or do you mean price?) They only way PE drops is for earnings to go UP UP (a good thing) or for prices to drop. If you mean prices (not PE) are dropping, simply say so. If EPS goes up, and PE goes down, most investors would be deliriously happy. A PE of 2 = cloud 9 (as long as it's not price that's dropping).

Anyway, my point is: if it's price that's causing PE to drop, let's use Price, otherwise I'm assuming it's EPS going up and who wouldn't love that?