QUOTE(simplesmile @ Dec 2 2008, 10:12 PM)
Which share will you buy?
AAA: Price $2.00, EPS $0.50, Div $0.30, P/E = 4.0, Div Yield = 15.0%
BBB: Price $0.90, EPS $0.20, Div $0.15, P/E = 4.5, Div Yield = 16.7%
Assume you have $10,000.
Buy AAA 50 lots. Cost $10,000. Div received = $0.30 x 5000 shares = $1,500
Buy BBB 111 lots. Cost $9,990. Div received = $0.15 x 11,100 shares = $1,665
Would you buy AAA because of lower P/E? Or would you buy BBB because of higher dividend? Why?
Nope, stock market is about future prospect of the company. If AAA earning is going to drop significantly, future PE will sky-rocket, which it is not cheap at all.
Same with BBB, if future company earning is not able to sustain dividend yield, then its share will plunge to match those lower future dividend.
Can't make much conclusion out of it. It is much more complex, as what stock market concern the most is the future, not the past. That's why you see stock market around the world plunge severely because of anticipation of economy recession.
QUOTE(Yithoe @ Dec 3 2008, 11:22 AM)
Any Sifu can roughly teach me how function in the culculation of EPS,PE,DY to know whether the stock is good or bad?
Thank.
For fundamental analysis, it is much more complex than that, but those are good way to start with.
You can google around, there are lot of information around the forum.
Cheers.