Do you want to to discover how to analyse UK companies easily, effectively and quickly?
Last week, I looked at pertinent statistical data for two US companies using a method pioneered by Ben Graham. It took five minutes.
In this post you’ll see how the process works using UK companies with a view to investing in them (or not) using the same ‘pairs comparison’ method.
Like the previous comparison table post, I have chosen the two companies that appear side by side but this time from the London Stock Exchange. I took the first two letters of my daughter’s name as a starting reference for finding them.
Company Analysis: Software Radio Technology and Solid State
|Software Radio Technology||Solid State|
|For an interpretation of what these metrics mean (PE ratio, price/tangible book value etc) and how they can help you be a better investor, click here.|
|2||No of shares of common||105,950,771||6,770,613|
|3||Market value of common||20,660,400||14,963,054|
|4||Total non current liabilities incl. preference shares||0||87,803|
|7||EPS this year||0.20||0.195|
|8||EPS five years ago||-3.76||0.06|
|9||EPS ten years ago||0||0|
|10||EPS five year average||0||28.28%|
|11||EPS ten year average||0||0|
|16||Tangible book value per share||0.03||0.39|
|18||Average PE ratio||79.60||5.84|
|20||Price/tangible book value||5.80||5.60|
|22||Net profit margin||2.83||4.72|
Software Radio has been operating since 2005, Solid State since 2006.
Software has 105 million shares outstanding, Solid State 6 million, which made me think that Software have diluted their value among a vast number of shareholders as compared to Solid State.
Software has no long term debt and preference shares, Solid state has £87, 803 long term debt, which compared to its market value is very small indeed.
On the earnings front, Solid State stacks up well compared to Software because of the negative EPS Software reported five years previously (-3.76) and Solid State’s 28.28% EPS five year average compared to 0% for Software.
Dividends have also been paid by Solid State since 1998, compared to no dividends being paid to shareholders by Software at all.
Balance sheet analysis shows that both companies have more short term assets than short term liabilities and in this regard, Software is in a stronger financial position due to a better current ratio.
Finally, Solid State also has a higher net profit margin and return on assets.
Ideally it would be better if both of these companies had longer operating histories. That being said, we can begin to make assumptions about the enterprises from the data that we do have.
Is there a case for investment?
Its commendable that Software has no long term debt and also has a strong short term financial position. But it fails as a potential investment in so many more areas as compared to Solid State.
In the battle for previous earnings, current valuations based on those previous earnings, profit margins and dividends, Solid State wins hands down – does that make an investment case for Solid State?
Just because one company stacks up well or is even superior to another company does not mean that it is worthy of investment.
Instead I prefer empowering you to make your own investment decisions. The posts below will teach you the tried and tested strategies of two very successful stock market investors.
- Here’s A Quick Guide To One Of Ben Graham’s Investing Strategies
- How To Use ADVFN To Invest Like Ben Graham And Walter Schloss – Part 1 and Part 2
The Shares And Stock Markets Blog teaches you about the techniques of valuing companies not to give tips.
The investment case for any company should be based upon your own independent research.
Thank you for reading The Shares And Stock Markets Blog and good luck with all of your investments.