Investors need a quick way to find out the value of a stock before continuing with greater in depth research.
Here’s a screenshot from one of my favourite websites with which I quickly try to get the sense of a stock’s value:
Data from morningstar.co.uk
Morningstar.co.uk is a great free resource when it comes to finding and valuing stocks.
The positive things that these ratios highlight are that:
- this particular stock is selling for 10x earnings and just below the sector average of 10.43 and below the market (15.43)
- growth in earnings per share has been stellar at 125% when compared with the sector 56.23 and the market 23.00
- net tangible asset value per share is way above the sector and market averages 48.61, 4.48 and 0.13 respectively
The negative aspects of this stock are that:
- the dividend yield is lagging both the sector and the market
- it’s price to tangible book value is higher than both the sector and the market
- return on capital employed is lower than the sector average
- price earnings growth is lower than that of the sector and the market
The stock in question is Lloyds (LSE: LLOY).
Would I continue research from here knowing what I know from just these ratios?
But still I’d place Lloyds on my watchlist so I could return to it later to dig a little deeper.
The point is that a website like Morningstar that neatly displays and compares key ratios in this way minimises the time it takes to decide whether or not a stock goes onto my watchlist.
Here’s another stock’s key ratios from the Morningstar website:
Data from Morningstar.co.uk
This is information from Morningstar is for BP (LSE: BP.)
I’ll not go over the same ground here but you need to be very careful when you use financial websites from stock research.
By way of example the PER (PE ratio) for this stock on the ‘Key Ratios’ screen shows 10.48.
On the share price screen it shows a PE ratio of 62.57:
On the ADVFN front page it has a PE Ratio of 6.78
Lisa was shocked to discover her stocks were more expensive that she first thought
The real point of today’s post was to show how to use financial websites to gain a sense of the value of a stock whilst being mindful of the dangers inherent in using third party data.
Financial websites can save you time but need to be used with caution.
Disclaimer: I have no positions in any stocks mentioned and no plans to initiate any within the next 72 hours. I wrote this article myself and I am not receiving compensation for it. It expresses my own opinion. This article is for educational purposes only.
- The Honest Truth About Ratios And Formulas
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- How To Value A Stock Quickly
- The Cheapest Stocks in The FTSE 100