Stock Market Investing: Company and Stock Valuation | Learning District | Skillshare

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Stock Market Investing: Company and Stock Valuation

teacher avatar Learning District, Invest in yourself

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

16 Lessons (4h 4m)
    • 1. 1 Introduction and Outline

      1:40
    • 2. 2 Course Overview

      12:41
    • 3. 3 Tools and Platforms

      18:27
    • 4. 4 Valuation Measures

      40:40
    • 5. 5 Financial Measures

      6:35
    • 6. 6 Live Example 1 Valuations

      30:46
    • 7. 7 Live Example 1 Financials

      24:16
    • 8. 8 Live Example 1 Stock Price History

      15:12
    • 9. 9 Live Example 1 Shares Statistics

      34:10
    • 10. 10 Live Example 1 Dividends and Splits

      13:27
    • 11. 11 Live Example 2 Valuations

      12:16
    • 12. 12 Live Example 2 Financials

      13:03
    • 13. 13 Live Example 2 Stock Price History

      4:02
    • 14. 14 Live Example 2 Shares Statistics

      4:29
    • 15. 15 Live Example 2 Dividends and Splits

      10:05
    • 16. 16 Final Words

      2:36
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About This Class

In this course, you will learn how to determine the valuation of a company or stock by analyzing different measures using ratios and statistics. We start by going through the valuation measures, then the financial highlights, and lastly the trading information for a given company. I will show you which platforms you can use and where to look to find these ratios and statistics to help with out valuation decisions. All the platforms and websites covered in this course are free and easy to use. Also, through out the course I will teach you the definitions and what trends to look out for. In Addition, we will cover some important terminologies and go through some live examples. These examples will include a side by since comparison of growth companies and blue-chip companies from the same sector. This will allow you to determine which company is undervalued and which company is overvalued. The skills learned in this course will help you determine whether a company has a good valuation and if it is a good investment and a possible vehicle for capital appreciation. The course will cover concepts such as short interest, dividends, and stock splits.

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Transcripts

1. 1 Introduction and Outline: Hello, welcome to the course and thank you for enrolling in this course. I'm going to teach you how to value stocks quickly and efficiently using ratios as statistics. Now you might ask yourself why it's useful to learn how to value stocks quickly or how to determine a company's valuation quickly, and the answer is simply saving time. Now I have a course on this platform where I teach about fundamental analysis and how to analyze financial statements in very detailed steps. And I highly recommend going through that course as well as very detailed and you'll learn a lot. But sometimes simply you want to value companies or value stocks and you have to do a lot of them, for example, a lot in the same sector in order to figure out whether they are overvalued or undervalued. And you simply don't have time to go through every single financial statement for each company. And this is where we can actually use ratios and statistics to help us determine the valuation much more quickly. So without further ado, let's jump into the course outline. So I'll start off by doing a quick brief introduction to the course. Then we'll talk about why we want to value stocks and determine a company's valuation. Then we'll talk about tools and platforms using this course to help us gather somebody's ratios and stats. And then we'll start covering some terminologies at definitions before looking at numbers. So when we get there we understand what they mean and what things we should look for. We'll cover interpretation of ratios and statistics. And then we'll do some live examples by looking at a few different companies. 2. 2 Course Overview: As I mentioned earlier, determining a company's stock price and valuation using ratios and statistics can help you save a lot of time. Sometimes you just don't have time to look at all of the financial reports or statements for accompany. And sometimes you just want to compare a lot of companies or valuing a lot of companies side-by-side in a shorter amount of time. And this is where you can use ratios and statistics to get the job done. And also you can use the platform to actually get a quick glance at the summary of the financials without looking at the actual financial statements. You can also quickly use ratios to sort of get a summary of profitability at a glance. And then you can use those numbers to actually determine the valuation of a company or a stock price and determined whether they're on the valued, fairly valued, or overvalued at any given amount of time. And then since they're going, there's going to be a lot of numbers and ratios. You can learn how to put it all together to help you format educated decision as an investor or as someone who might be interested in company valuation or financial modelling. So now we'll talk about why we want to value stock prices using ratios and statistics. Well, the first reason is the stock price or the current stock price doesn't always, necessarily represent the current company fundamentals. And also, we want to actually use the ratios and statistics to determine the fair value of that stock. Second reason is that the stock prices can get disconnected from their fundamentals and reality for many different reasons. So for example, catalysts and news. If there's positive catalysts or there is a positive news about accompany, it could shoot the prices up really, really high. Because there's a lot of excitement from the investors and institutions. A lot of hype everyone's buying into that company because of the good news. Even though the fundamentals of the company hasn't really changed. Because even if there is a good news that will help that company grow, that growth doesn't come overnight. It will take many, many months and years for the income or earnings of that news to actually reflect on the company's fundamentals. So that's, that's for the positive cat, catalyst. The same thing could be said for negative catalysts. Sometimes when there's bad news for a company, a lot of institutions or shareholders will sell off. We'll help shoot the price down or drive the price down really, really low, even lower than where they actually should be. And then prices get disconnected from the company's fundamental. Then there's market perception and psychology. So for example, what does the investing world as a whole, or Wall Street, you might, might say, what does Wall Street Think of this company if they investing world doesn't really like a company, for example, well then they won't purchase any of their shares, which in turn won't increase the stock price for that company. Or if they're holding shares that might sell out of that, which will drive the price down. Or even So they might even bet money against it as sort of a short position. And short position means that they're actually put in money betting that in the future, the stock price of that company will go down. Another reason is being able to tell whether or not a company's future growth is already priced into the current stock price. As you may know, all of the publicly traded companies on the stock exchange have to report their earnings every quarter. And all of that information and financial reports are made available to the public and all of the shareholders. Sometimes you will see companies reporting really, really good earnings and beating all of analysts expectations. And all of the sudden the stock price actually falls. And this is quite normal in the stock market. And for publicly traded companies. And most times, not all the time, but most types. This is because all of that future growth and excitement was already built into the stock price at the present time. So sometimes the company's stock price can run up really, really high due to no good reason and get disconnected from the fundamentals. But when the earnings number, when the earnings report come out and investors see the numbers being presented to them, they'll realize that this stock was actually overvalued at the, during the earnings report. And some, some some might decide that it's time to actually sell out of the stock because it is currently overvalued. And when something is overvalued, it means that either the price might fall or pull back for the next little while or just stay flat and not do anything. Because again, as I mentioned, all of the growth and all of the excitement and hype was already built-in previously on the run-up. So this has happened a lot and I've seen this firsthand that after good earnings report, the stock price can actually fall. And this is where being able to determine a company's valuation and determined whether a company's stock price is overvalued or fairly valued or undervalued. This, this can actually help you make educated decisions about investment choices when determining a company's stock price and its valuation. We can break them into three categories. Under valued, fairly valued, and over-valued. Under-valued means that a stock price, a company's stock price is actually trading below its intrinsic or fail, fair value. And fair value means that the stock price is trading at about where it actually should be. So around the area where it's actually a fair value compared to its fundamental. And overvalued means that the stock price is actually trading above its fair value. Now, there's a reason, there's usually a reason. In theory, most stocks should be, if they're stable, they should be trading within their fair value. But there's always a reason why companies trade. Below their fair value or above their fair value. And we'll get to some of those reasons. But for example, as I mentioned earlier, news or catalyst could be one, right? So for example, if there's a temporary bad news for a company, but doesn't really affect the company's fundamentals. For a short period of time, the stock price can go from fair value to undervalue. Now, as investors or people who can do financial modeling, if you're able to tell that this is just temporary and the company will deal with this bad news and get back on track than if a stock is actually trading below its intrinsic value and is considered on the value, this might create a huge, a potential investing opportunity for investors to get some massive capital appreciations. If you're actually trading or investing in a company that's fair value, it's still good. And if you're planning to invest in a company that is currently overvalued? Well, that's definitely not something you might want to consider not doing because when a stock is overvalued, there's two things that usually could happen. Well, there's three things and the stock could continue to go up, the stock price can continue to go up, but the chances of that happening is much lower than the other two scenarios. And the two other scenarios are, first one, being there could be a pull back, so the stock price could go down for a short period of time until the company can present some new numbers or be more innovative and show investors that they can grow even further in the coming months or quarters or years. And also, another thing that could happen with stocks that are overvalued is they could stay flat for a given period of time. They can just trade sideways and not do anything again until the company comes and presents some innovative measure or show the investors that they are innovating and they're continuing to grow. To summarize valuing stocks and understanding accompanies fundamentals can help you understand if a company's stock price is overvalued, undervalued, or fairly valued, then you can actually use that to determine how much room there is for growth. So for example, as an investor or someone who wants to invest money into a given company, you can determine how much potential capital appreciation is ahead for you. It can also help you determine good entry points. And I have a slide coming up which I'll get into more details next. And it will also help you and give you the ability to interpret and understand the ratios such as price to earnings, also known as PE ratio, then price to sales, price to book, and many more. As a long-term investor being able to value stocks can help you determine when is a good time to buy into a stock, or when is a good time not to buy into a stock or potentially went to sell out of a position if you're already holding stocks for a given company. For example, if a company is. Trading near its fair value price, then knowing that the company has a lot of room to grow for this, you'd actually have to do a research, understand the company's business model and revenue growth model. Something you should do on this side. But assuming you've done that and you know that the company has a bright future than buying that company stock or investing in it near the fair value stock price could be a wise decision investing decision. Same goes for undervalued zone or region here. So stocks don't usually trade near the undervalued, undervalued region or undervalued price. Unless there is usually a bad news or a bad catalyst that drives the price down, making it under valued. Now, assuming that that bad news, for example, is just temporary and the company is able to handle it and overcome that obstacle. Buying in the undervalued region into that company stock could provide, potentially provide a lot of capital growth in the future. So for, for us in this course, this, we considered this a by zone. So if the price is actually trading near the fair value or its trading near undervalue region. This zone here is, we consider this a by zone as investors. So this is a good time to actually invest into a stock. Assuming you've done your research, you understand the company, You understand how they make money, how they bring in earnings, revenue and cash flow. And buying in this zone here could potentially bring a lot of capital appreciation to your money over the long term. Now, being able to value a stock and determining that, for example, it's overvalued. This is probably a region where you don't want to invest your money yet because what happens when you buy into an overvalued stock or when the price of the stock is overvalued. There, there's a few scenarios that could happen. So if a stock price is overvalued, this dog could certainly run higher from that point, but the chances of that happening is lower than the other two scenarios. The second scenario is that there is a pull back. So this stock price actually goes down a little bit so that it reaches the reality point or represents the reality a little bit more. And the other, the third scenario is that the stock price actually remains flat for the foreseeable future. So the stock price can just trade sideways for a period of time until they accompany proofs to the investors that they can still innovate. And there's a lot more growth to come, which can get the investors excited and you will see more money coming into the company. 3. 3 Tools and Platforms: Alright, in this section I want to cover some of the tools and platforms you can use in order to help you find the numbers for the stats and the ratios we're going to need in order to help us value stocks for fee. So keep in mind that there's a lot of websites and platforms out there. And please feel free to use whatever you are more comfortable with or whatever is more convenient for you. My goal here is to maybe introduce you to a few so that you can later, if you'd like, you can refer back to them and use them as a reference when you're valuing stocks in the future. So essentially my goal is to maybe introduce two or three examples. And then we'll cover the one that we're going to use for the remainder of this course. First example I want to show you is a website called seeking alpha. So if you can just Google seeking alpha here, and it'll be the first result on this search. So seeking alpha.com, if you click on it, it'll take you to the seeking alpha website. This is a great website for researching companies or stocks. And as you can see when we go the homepage, there's a lot of information here. There's some tabs on the top. There's some indices here like Dow Jones index, S&P 500, nasdaq Index. There's a quick chart here. There's Latest News or trending news down below. So definitely check this website out if you have time. And there's a lot of good information here for investors. And on top of that, there's a lot of, you know, up-to-date news or trending news about stocks that are, you know, either do really well or doing really bad. So definitely check this out. And for our purposes, we'll be using this to find some other ratios and stats to help us value stocks. So first thing we need to do is provide it the company name or the ticker symbol if you know it off the top of your head. So for example, for this lecture, we'll use Apple as an example. So I'm sure everyone's familiar with Apple and what they do. They make iPhones, iPads, MacBook. They have their server streaming services for TV shows, music, movies, and so on, right, so let's use that as an example. And the ticker symbol for Apple here is AAPL. So in this search box here, so you just need to click and type in AAPL and ill. You can select Apple from the Apple Inc. as the company name. So if you just select that, it'll take you to this website. It'll take you to this page on seeking alpha website. And as you can see, there's some quick summary information here. So here's a chart, right? There's some settings here, preconfigured settings. So if you want to look at the one-day charge, you click here, you know, I look at five-day charge, you click here one year chart. You could play around with this, right? There's a lot of tabs on the top here, which we'll talk about in a second. And there's some quick stats here that we can take a look at, right? So talks about 52-week range, day range EPS, which stands for earnings per share. And then in the bracket here it says FWD, which stands for forward. So when you see the word forward for the ratios and stats will cover in this course. It is referring to the next 12 months. So it's really projections, right? It's projecting based on the company's performance and revenue growth. Those, those are what the numbers will be. So it's the upcoming 12 months. See the words TTM, it stands for trailing 12 months, and that's referring to the last 12 months. So all the numbers are based on the how the company did in the last previous 12 months. So that's for TTM. And here we can see EPS earnings per share. And these are the corresponding numbers. We got p0, which is the price to earnings. One of the most important stats will cover in this course. Dividend rate yield short interests, short, short interest is when like how the market as a whole think about a company and whether they think the company's going to do bad. So short interests means that the stock market as a whole, or Wall Street thinks the company is going to do really bad. So they bet money on the stock price going down. So in Apple's case, you can see that the short interest is actually really low. It's not even 1%, right? Which is, which is really good thing. If this number is low, for companies that are very high risk, they're not doing very well there, close to bankruptcy, you'll see very, very high interest on those like 203040, 50%, which are really bad. Definitely something for you to look out when you're valuing stocks, right? In this case, apple is pretty safe bet because it's not even 1%, right? Talks about the market cap. So this is a few, we'll talk about what market database. But basically it's if you had to put a dollar amount that the entire business, this is how much the business is worth as of today's closing or trading session, right? And it's 2.32 trillion, which is huge. I think it's the biggest company in the world at the moment. This is the largest market cap. I've seen $2.32 trillion, and this is the volume, so a number of shares being traded. So you can definitely go through these. And these are some quick stats on the top here I wanted to bring your attention to the growth tab. So if you look at the growth app here, does lot of stats and ratios you can refer to. I'm not that same as the previous page. If you hover over anything, there's a tooltip and gives you the full information of what it means. So it's really good. That's one thing I like about this website. If you don't know, obviously after some time and practice, you will know what all of these means. So you don't really need the tooltip, but in this case, a just shows you the tooltip, which is really helpful for someone who's a beginner and doesn't know what those things mean. And looking at the growth here, so revenue growth, YoY means year over year. So you can see that Apple had 5.51% revenue growth. And then right beside it talks about the sector median. So not too far off from the Media, which is a good sign. So 5.51% versus 5.66. So it's a little bit below sector medium, but not by a large amount that would concern us as investors. So there's revenue growth. And you can go through all of these things here. There's a ton of information we won't cover. Every single thing here in the course will cover the most important ones that I think will be beneficial to you to help you get started when valuing stocks, right? Because remember the goal of the course is to be able to value stocks quickly and efficiently in a few minutes. If you want to go through every single one of these things, it'll take you a lot more than that. So the goal here is efficiency. And that's what we'll focus on the most important stats. Now if you click on value, you'll see a lot of different ratios here as well. So for example, these are some of the ones we'll cover in the course like price two cells. So remember TTM stands for trailing 12 months. So price to sales for Apple is 8.6 for all the corresponding numbers are here, right? So we got price to sales forward, so the same number but forward-looking. So this is the last 12 month, this is the next 12 months, write 7.36. So this tells us that and according to future projections, Apple will actually have a price to sales ratio lower in the next 12 months that it did in the past 12 months. Now, later in the course will cover if that's a good thing or a bad thing, like what this price to sale mean? What is it mean to have a higher number of what does it mean to have a lower number, right? Same thing. We got price-to-book, right? We've got price to cash flow and so on without price to earnings, which is p0. And this is just wanted to bring this to your attention so you can see that all those ratios and numbers are available here. So again, one thing I do like about this website or the tooltips, the all the numbers are here. All the tooltips are here right? Now, note that over here, like you see that there's a lot, there's a lock icon, right? So in order to column is called sector relative grade. So if you wanted to see that number for a comparison, then you will need to sign up for a premium. But for the purpose of this course, we'll really need the premium stuff because we'll just be looking at the numbers on their own, right, so we don't really need that, but seeking alpha has a free version and then it has the premium version here, right? So if you click on preview and you know, once you become an advanced, more advanced analyst or someone who has gone through the beginning stages of valuing stocks. And maybe someone who just needs information about things that are currently locked on the website, right? That's a good time to actually spend money and get the premium so that you can all log a ton of features on this website. So if you go back here, there's, if you go through different tabs, there are definitely things that all logs. So for example, here, Apple growth grade, there's a rating that's giving it, given to it by animals, but you can't see it, right? This could be like a helpful metric for you if you're looking for something specific. So just wanted to put down your radar for the purposes of this course, I think the free version will get us through. You don't really have to sign up for anything. So this is seeking alpha and this is where one of the places you can actually find their ratios and stats in order to help you value the stock. The next platform I want to introduce to you is a website called Morningstar. So if you just type in Google. Morningstar. And it's this one here, www_Morningstar.com. So if you click on that, it'll take you to the Morning Star website. And again, this is another platform or website you can use in order to get somewhat the same numbers for ratios and stats we need in order to value some stocks. And again, same thing as seeking alpha. This is free. You can sign, you can sign, make an account and sign in to save certain things were persists somewhere you there things you're actually looking for on this website. And they also have a premium version that you can sign up for. So for the purposes, what we're looking for or what we need from this side, the free version will do so. No need to sign up for anything. And when you come here, this is the summary page, right? Again, on the top left here, we can look for that company we are trying to value or analyze. So in here, let's look for the same company. So if I put AAPL, we're looking for apple. It'll autocomplete here in the dropdown. So let's select the apple, and it'll take us to this page. So over here, again, there is a lot of tabs that you can refer to. The page is still loading. So here's the, here's the chart. Here's some quick stats here again. So here's code. So just talks about some trading stats here of the day. We got some of the quakes that ratios here, price to sales a 0.61. Better. We got forward P of 34, price-to-book of 35 or nine. So some of those things are here immediately. You can take a look at key ratios. You can click on key ratios. It talks about revenue growth per operating margin, cashflow. Roa is return on assets and so on. So ROEs return on equity and so on. So debt-to-equity ratio tells you about the company's debt. And again, and then if you scroll down, there's going to be news and so forth. Company profile like talks about what Apple is and what they do and their products. And again, want to bring your attention to these tabs here. So this is a really good website. If you just want to look at the company's financials, get more information. Look at, look at the news, Take a look at the analysts, what analysts say, dividend history and so on the exit the executive team and so on. So again, just wanted to bring your attention to this valuation tab. So let's click on valuation. And that should load this page here. So if we go here you can see that there's a really nice table here and it breaks it down for us year over year. So you can actually see how the company is performing year over year, right? And also relative to the index. So here you've got all your ratios on the left-hand side. So you've got price to sales, right? And there you can see the price to sales for 20142015201620171819. And so you can see that the price sales. Actually sort of increasing over time, right? So a went from three to 338 to three again. So he went lower low bid and then 5.25. And this year is actually 8.61. So like this year is the highest it's been, right? We got price to earnings. So price to earnings is actually again, same thing. We are going from 11 to 14 to 18 to 13. So drop down again and then to 24 massive jump and then 24 to 41, huge, huge jump this year. So this year the PE ratio is actually really, really high. Again, we'll cover what P is and what it means for it to be high or what it means to be low and whether it's a good thing or a bad thing. And then we've got price to book, price to forward earnings peg. So this is the growth ratio. And again, if you scroll down here, there is, I guess this is it in terms of valuations that so again, this is a platform you can sort of use in order to help you find some of these stats. And just wanted to put this on your radar. So this is another free tool you can use in order to help you find the corresponding, find the corresponding numbers for the ratios in order to help you value stocks. Last example we're going to cover in this section is a website called Yahoo Finance. And this is actually one of my favorite ones for several different reasons. And for the remainder, this course will use this platform to actually help us value stocks. And first of all is free. Second of all, all the information is gathered in one place so you don't have to sort of switch between multiple tabs to gather different ratios or stats. Everything is just concentrated in one place. And lastly, it's very easy to read. So it's very, from a readability perspective is very easy on the eyes and it's very simple. Table format at it's easy to read the ratios and the numbers. So for the remainder of the course, this is what we're going to use. So let's go ahead and find that in Google. So if you just Google Yahoo Finance, and it'll be the first link here or alternatively, you can just type in finance dot yahoo.com, and I'll take you to the same place. So here you will. Homepage looks very similar to the other platforms we covered earlier in this section. You got your popular indices, you got trending news, you got trending stocks and so on. And on top here. You can actually use the search box here to actually find the company we're looking for. So let's use the same example as previously, which is Apple, so AAPL. And let's go ahead and click on that. And this actually loads all the information for the company Apple. And if you scroll down here, here's the summary tab, so there's some quick information for you at a quick glance. So on the left-hand side here we got the information about the trading volume and price action, which we don't really care about in this course. The right-hand side here is more of a concern for us. So this is what we actually want to pay attention to. And there's some quick ratios here. So for example, the market cap, the better number, PE ratio. And note that it's TTM not forward EPS, earnings per share, earnings date, dividend yield, and so on. Right? And again, we're not going to be using this, Just wanted to let you know this information is available. If you just want to quickly, briefly look at some of today's information. And this is as of today's closing, right? All this information is as of today's closing. And the thing that actually interests us the most is a tab up here called statistics. So if you go ahead and click that, this is where all the information is just displayed to us in one place. So for example, you have your market cap enterprise value trailing P4P PEG ratio, price to sales, price to book and so on, right? Then you also have financial information. You have information about how profitable the company is. You've got information about financials such as income statement, balance sheet, and cash flow. And the right-hand side, you got some price history. And then we'll look at share statistics. So this talks about like things such as what was the volume on average? How much float is there? What are the shares outstanding? Percentage of shares held by insiders versus the percentage of shares held by institutions, shore interests and so on. And then on the bottom here, you are displayed somebody for VR display with some information about the dividends and stock split and so on. So we won't cover every single thing. In this section. We'll try to quickly go over most of them. But remember the point of this course is to help you value stocks quickly and efficiently. So we'll look at the most important stats and ratios. And we'll try to go through all of these throughout the course if we can. But remember, I don't want you to lose sight of the important thing about this course, which is valuing stocks really quickly. So coming to this page at the end of the course, you should be able to sort of tell if the stock is undervalued or overvalued or trading near the fair value. 4. 4 Valuation Measures: Before looking at some actual numbers for several different companies through live examples, you have to understand some of the terminologies and definitions so that it can help us make sense of the numbers when we start looking at them. So the purpose of this section is to understand what the ratios and stats mean before we actually look at some numbers. The first valuation measure we're going to look at is called market cap, also known as market capitalisation. But you'll hear different people or investors might refer to it to market cap as short. So mortgage gap simply is how much a company is worth in the stock market. So, for example, if you were to put a dollar amount on the company as a whole, what would that dollar amount b. So that's basically the definition of market gap, how much the company is worth. Now, the formula to calculate market gap is simply the number of outstanding shares times the price. And the outstanding shares is the number of shares that are currently held by the investors. So one thing to keep in Node is that market cap is directly proportional to the price of a stock. As you can see here in this formula, that's number, the share price is in the equation. So if the share price goes up or down, the market cap is actually going to move up and down with that. So it's important to understand that they are directly proportional. And one thing to note about market gap is a lot of investors use the share price to do their analysis when comparing companies together, maybe different companies in the same sector or companies to their peers, to sort of get a point of reference whether something is trading along the same as the industry, or whether it's trading higher or lower than the industry the companies in. So market cap is actually a better metric to value a company when you're comparing it to its peers as opposed to stock per share. So this is one thing to keep in mind because accompanies, for example, you could have a company a that has a share price of 100 and you can have a Company B that has the share price of ten. It doesn't mean Company B that has a share price of ten is actually has a lower value than company B, right? So it's always better to look at the market gap as a whole to get a better sense of the size of the company you are trying to actually compare to. Here's a quick example to calculate market cap with some number. So imagine a company a has 1 million shares outstanding, and today's stock price for one share is actually $10. So in order to calculate the market cap, what you have to do is take the 1 million shares and times it by one shares price, which is $10. And you get your market cap of 10 million, which is pretty simple, right? Here's another example where you can actually use market gap when comparing different companies in the same sector. The thing I mentioned earlier in this section, so for example, you have company a, and company a has a market cap of 500 million and it brings in an annual revenue of 10 million. Right? And it's share price, one for one share is actually $25. So it's $25 per share if you wanted to invest in company a. Now you have company B, which actually has a market cap of 200 million, so about 300 mille less than company a, Buddha annual revenue of 10 million. So it brings in the same amount of revenue as Company a, but its market cap is 300 million less and the stock price for one share is actually a 100. Now keep in mind, this is an example and I've made up these numbers, but I'm trying to illustrate a point here. So for company B, you have your stock share. Stock price were 1J is a $100. Now, looking at this, which company do you think is better choice for investment with the Higher growth potential, right? So if you look at this, you, if you were just to look at this stock price here, company B has a stock price of a 100 per share, and company, company B has a stock price of a 100 per share, and Company a has a stock price of $25 per share, right? So at a quick glance, if you're just looking at the stock price, then for sure company a looks on their valued and it looks cheaper. So some people make the mistake of actually investing in that stock because the stock price is cheap and they can get more shares for the same amount of money, dollar amount of initial seed or investing money. And so they immediately go with company a because it has a cheaper share price. But if you actually look at market gap, market cap wise, this company is actually, is undervalued compared to the company a. Company B is on the value by 300 million, because if you look at the revenue, they both bring in 10 million. So investing in this one even do the share price is higher, is a $100 per share. So it's four times more expensive. In terms of share price, the market cap is a lot less. So if you're comparing these two, I would say company B here is undervalued. Now there's so many other factors that we're not really considering here. And this is just meant to be a simple example to illustrate a point that just looking at the stock price solely alone won't really beneficial and good investors actually look at market cap when you're trying to value stocks with different, comparing two different companies. So please do keep that in mind. This is a mistake that a lot of investors out there make or a lot of beginners make. So keep in mind the market cap as well. Of course, the stock price per share is important. But in this scenario I'm presenting to you here, the stock price is actually more expensive, but the market gap is less. So I would say company B would be a better investment with attention to the revenue of both companies being the same. All right, the next valuation measure we're going to cover is something called the enterprise value or also known or short for EV. And you might hear this term a lot so. Enterprise value is simply a measure of companies total value. So very, very similar to market gap, except with few differences. So the formula for enterprise value is, as you can see here, market cap plus total debt. And that debt is the short-term debt and long-term debt minus the company's cash and cash equivalents. So anything that's a liquid asset or it can be turned into cash quickly. So that's the formula, market cap plus total that minus cash and cash equivalent. So as you can see, this is very similar. The enterprise value metric is very similar to market cap, except it does take into consideration the liabilities and cache or assets of the company, which makes it a more accurate representation of the company's value because it does consider those things, right? He considers market cap, short-term and long-term debt and cash and cash equivalents. So a lot of investors actually use Evie when comparing companies or whether they want to see if it's undervalued or not as relative to other metrics as opposed to the market gap. But we can actually use both. So imagine you have a scenario where the market cap is actually less. So the number of market cap is less than the number of EV. So what does that tell you? What does that mean? That means if the market cap is the number is trading below the EV number, it means that that company is potentially undervalued, right? So this is really important to keep in mind if the market cap is trading above EV, it means that it is potentially being, or trading at a price that is overvalued. So very important to keep in mind. The next ratio we're going to cover is called the price to earnings, also known as the PE ratio. And this is an important one. So make sure you understand this one really, really well because it's commonly used and very widely used amongst all the investors in the investing community and also by Wall Street in the stock market. So price to earnings, the formula for P is simply price per share divided by EPS. Now, I just want to step aside for a second, and instead of continuing to talk about PE, I'd like to explain what EPS is first so we can continue talking about price to earnings ratio. Eps simply stands for earnings per share. And you can think of it as EPS is simply a number that tells you how much money the company makes for each share of stock. So simply how much profit the company is making for each share of stock out there. And the formula for EPS is simple. So EPS equals net profits divided by shares outstanding. And don't confuse net profits with net income. So net income, if a company, for example, peace dividend, you have to subtract, subtract that from the net income first because net profits means the profits after paying out. Everything. So all the expenses, all the taxes, all the simply just everything, all the dividends. So that's what net profit is. So net profits divided by shares outstanding gives you EPS, which is the indication of how much profits accompanies making for each of these shares out there. Now, when you're looking at a EPS for accompany higher EPS could tell us a few things. So first, equid tell us that the company has higher Prof. profits relative to its share price. So that's a really important thing to know. Also, higher APS could tell us that the company has a higher value compared to his peers in the same industry. So one thing to note here is, I don't want you to make some higher value with the definition of overvalued. So there are two different things. So please don't mix those up. Higher value means that it's actually a good thing. It's, it's, it's telling us that the company we're looking at that has a higher EPS is higher value when comparing it to its peered overvalued is actually a bad thing. It means the company is trading at a price which is overvalued. Now let's jump back into the PE ratio. And one way you can think of PE ratio is how much investors are willing to pay for $1 of earnings for a given company. So think of it in terms of multiple. How many times, more or how many more times investors are willing to pay. So here's an example. If a company a has a P of 100, it means that people are buying that company. It tells us that the investors are willing to pay a 100 more times for the earnings at the current time. So remember that the investors are willing to pay a 100 more times for the earnings at the present time. So whatever the earnings the company is bringing in, the investors are actually willing to pay that price if they believe in the company or the company shows signs of healthy financials and profit, a great profit margin and a lot of revenue growth. Now, higher P is typically when you look at a company and it has a higher P typically tells us that company is considered overvalued. And is that necessarily a bad thing? Well, not really, but we'll get into it in a second. But just something to keep in mind. So the higher the rule of thumb is, the higher the PE ratio, the more the company's overvalued. And conversely, the lower the PE ratio, then the company is considered undervalued. One question that comes up a lot is, should you not buy companies with really high PE ratios? And the answer is no, not really because growth stocks or growth companies typically have very PE ratios and that's because they take all the revenue they make, bag and inject it back into the business so that they can actually grow the business and become more profitable. So most, most of the time when companies start up or when you have a startup or a company that's very, very young and in early days of its development, they tend to have a lot of revenue because they're small. They're able to grow revenue quite. Rapidly and a very high scale, as I mentioned, sometimes a 100% under 50%, even 200%, which are just massive numbers in terms of revenue growth. And what they do with that revenues, they take that and they inject it back into the business so they don't really pose any profits or earnings. Until few years have gone by, the company has been able to establish itself, expand, and spend money on capital expenditure and things like that. And I cover all of this in my other course, so please check that out. I have a course on fundamental analysis and financial statements. So we get into that in very great detail. But typically the answer is no, just because a company has a really high P doesn't mean you should immediately dismiss it because you think it's overvalued? Yes. The high p typically does mean overvalue, but you have to look at the company and distinguish whether that the company is a growth company or not. If the company is not growing their revenue rapidly, then yes, having a PE, 100, for example, is very, very high. And high PEs tells us that the companies, again, when you look at a company that has a really high PE, it tells us that the company are very overvalued or the company is a growth company, so they're growing revenue rapidly. Then the next thing is the low PE. So if a company has a low p, it means that typically means that companies that are undervalued and under the radar. So not many people know about them, so they're good companies, not many people know about them. We haven't had a money rotation coming from different sectors into this company or via the lot of institutional investors or retail investors don't know it. So they haven't stopped buying this dog. And that's one of the main drivers of the price going up. So that's one of the cases where companies having low p and being undervalued, and sometimes companies that have low p is this is where you have to be careful because just because a company has really low PE doesn't make it a really good option for investment. Because what happens is that the company could have a really low P because the price has gone down significantly. So remember, P is price divided by earnings. So it is directly, the PE ratio is directly proportional to the stock price per share, right? So if something bad happens, for example, if, if, let's say the stock prices have fallen significantly because of some bad news are bad cannulas, catalyst or some bad incident, then the, for sure the company's stock price will go down. And so the PE ratio will go down. But that doesn't necessarily mean it's a good company to invest in it just because it's seen undervalued from that point of view. So you'd have to do your research. You see why if you find a company that has a really low P, you have to find out why they PEs low. And sometimes you see companies that have no PII or also CNA or not applicable. And that's just simply means that the companies don't make any profits. So if a company is not really making profits, it doesn't make sense to have a PE ratio. So you won't see that for the companies that are now making profits at the current time. And sometimes you'll see some numbers posted as negative p for some companies. So negative 5y means that the company, not only they're not making profit, but they're losing money. So then net income on the income statement of the financial report is actually negative. So the EPS is negative. So when you see a negative p, it means that the company is losing money at the moment. There are a couple of more things I like to cover about the PE ratios. So there are typically two sets up P ratio and what is called trailing P. And the other one is called forward piece. So trailing PE or also you might see PE and in brackets TTM, which stands for trailing 12 months. So this is the p base on the earnings for the past 12 months. Okay, so keep that in mind. And forward PE is simply the PE ratio for over the next 12 upcoming months. So it's really a projection, so it's the P for the next 12 months, so into the future. So it's not, there's no guarantee that, that will be the P is just the, this is based on what analysts think the revenue and earnings for that company will be based on some of the calculations they have and projections they have. They can calculate the forward p. So again, it's just the PE for the next 12 upcoming months and it's the projection for earnings for the next 12 months. So keep those two numbers, a mind, a trailing and forwards because they are displayed as two different numbers. Now, when you see the forward PE is a sign, when you see a forward PE that is less than the trailing PE. This is actually a really good sign because it tells us that the profits are projected to increase for the company. So when the revenues, when the sales of the company grows, when they start selling their services and products, that brings in more revenue. More revenue means more earnings and profits for the company. And the higher the earnings that lower the PE ratio will be. So again, when you see from a valuation perspective, if a company has a forward PE of, you know, less than a trailing p, That's actually a good sign, especially for a company that has been established for a while and it's no longer considered a startup. Now, one last way, uh, one last thing I wanted to show, show you is just another way of looking at what a PE ratio is and what the numbers mean. This is a really simple example. So just wanted to bring you back to the equation here. So remember that the PE ratio or the number for the PE, doesn't matter if it's forward or if it's trailing. Let's pretend this is trailing. So the equation for P is price divided by earnings, okay? In very simple terms, price divided by earnings, that's the equation. Now. If the price goes up, so if the top number on this equation goes up, it'll automatically make the PE number up, right? And this is a situation that's, we considered the company to be overvalued, right? The hierarchy, the more overvalued companies, with the exception of growth stocks, right? So keep that in mind. But if you're just looking at a company that's very average performing and the price of it goes up. Now the price could go up. Sometimes things can get disconnected from reality, right? Like this stock price doesn't always necessarily represent the reality of the company's fundamentals and financials. And that's just something that happens in the stock market all the time. Sometimes the price goes up really, really high because people are really invested in it. There's a lot of hype, there's a lot of fear of missing out. So people are just constantly jumping into this dog by buying into shares and starting big positions. Sometimes institutions jumping at day by a lot of amount of shares. Sometimes it's dark, it's part of an ETF, which is an exchange traded fund or an index fund or mutual fund, which leads to a lot of institutional money going into the pool and increasing the price. So lot of things could actually drive the price up, right? And hence, a kinda gets disconnected from reality in terms of fundamentals. And that also drives the PE up. So this is the situation where we don't want to be and that's why I have an x here. So the higher the price, the higher this P number. And this is the overvalued situation. Now if you look at the other way, if the earnings, if the bottom on the, if the number on the bottom of the equation goes up, then it will bring this number down just, this is a simple division equation. So if this number on the bottom goes up, this will go down. Now this is actually from an investor point of view or someone who's trying to value a company. This is an ideal scenario. This is what you want to see happen because for the earnings to go up, that's actually a good thing. It means the company is making more revenue and hence more profits and earnings, right? And this is why I have a green check box here. So this is exactly the type of situation we want to be in as investors. And when this goes up and earning goes up, which is a good thing, it will drive the PE ratio down. So this is y. This is what we consider stock that's either undervalued or trading near its fair value. But mostly the lower the pH, the more attractive the valuation of the company becomes from someone who wants to invest in the company and buy their share price shares. The next ratio we're going to cover is called the PEG ratio, also known as P0 to growth ratio, also known as price to earnings to growth ratio. But for this course we'll just call it PEG ratio because it's very short and easy to say. So the formula for PEG ratio is simply p divided by EPS growth. Now this EPS growth is typically the projected growth for into the future over a specific time period, but typically it's done over the next five years. And you'll see this later on in Yahoo Finance. But the formula is simply, let's just say it's p divided by EPS growth over the next five years. And PEG ratio helps us determine a company's true value while taking in its future earnings into consideration. And as I mentioned, typically it's over a 5-year projected period into the future. And using the PE ratio alone is fine, but using the PEG ratio is also good because it shows really the true value of the company's future growth as well, because the PE ratio doesn't tell you anything about that. But it just simply tells you a composite to their earnings. But the PEG ratio not only compares it to the earnings, but also takes into consideration the future earnings growth, which is very important. And this is a good ratio to use in addition to just using the PE ratio on its own. Now, here's some rule of thumb here some numbers for rule of thumb when looking at the PEG ratio and the PEG ratio of one, this is actually a perfect situation. This is the perfect scenario. As an investor you want to be in most of the time this doesn't happen, as I mentioned, market doesn't necessarily, the stock price of a company doesn't necessarily follow its fundamentals most of the time in the stock market. You know, for different reasons. And, but this is the perfect scenario. And when you have a PEG ratio, a one, it tells you that the company's values and earning growth are perfectly in line. So there's a great correlation between the two and they are perfectly in line. If you have a PEG ratio of over one, which is what I've seen most of the time over the years, looking at different companies and valuing them. So most of the time I see a PEG ratio of higher than one, which is still fine. It doesn't mean it's a bad thing, it's still fine. But having a PEG ratio equal one is just almost, really hard to find or almost impossible. And if the company has a PEG ratio of higher than one, it's considered to be overvalued. And if a company has a PEG ratio less than one, then it's considered undervalued. But as I mentioned, this scenario rarely happens most of the time we will see companies that have a PEG ratio higher than one. Now a PEG ratio is a good stat to use for companies that have very high P. So as we discussed earlier in the course, Growth companies, or at least the companies who are at the early stages of their life-cycle and development, they really use, they can grow revenue at a very rapid pace, but they probably won't make any profits because they're going to use that revenue to reinject it back into the business, to just grow and grow. And at some point, the numbers from the top-line, top-line means that revenue growth will make it to the bottom line, which is the net income. And again, as I mentioned, I cover a lot of these things into, in my other course, fundamental analysis. So please check that out. It gets into great details about those things. But overtime, someone who's topline numbers, we'll slowly start to make it into the bottom line and that's where we'll have some earnings. And then we can calculate things like the PE ratio and the PEG ratio. But it's a good stat to use for companies that have high PEs. And If you have a company a, here's an example. If you have a company a, and it has a really high PE, but has a low PEG ratio. This is actually a good sign. So you can't just look at the high PE and say that this company a has really high p, therefore is overvalued and I'm not going to invest my money in. That's the wrong way of looking at it. Company a might have a really high PE because they're just, they're generating massive revenue growth. But they don't have a lot of earnings, right? So if they have a, they have a low PEG ratio, then it tells you that their projected earnings for the next, they projected EPS growth for the next five years is actually pretty good and pretty in line with the company's valuation. So this is one place you could consider using the PEG ratio for companies that have really high peas. And as I mentioned, if the company is at early stages with no earnings, then just like PE, you won't be able to calculate the PEG ratio because simply there is no EPS, there's no earnings, there won't be any ps. So sometimes when you're looking at different platforms are websites and you're looking for PEG ratio, a lighter just won't show any numbers or just say NA or not applicable. So this is another thing to keep in mind. Next we have the PS ratio, and this one is also another important one, just like the PE. So please make sure you understand this one really well because this is another important one. Investors or people who want to value stocks actually use, especially when it comes to growth, companies, companies that are not really turning any profits at the moment. So PS ratio stands for price to sales ratio. And the formula for it is simply the market gap divided by revenue. Now over here I put TTM so you could calculate the price to sales ratio or PS ratio based on different timeframe. So for example, if you wanted to know the price to sales ratio for a company right now, then you would take the market cap and you divide it by the revenue for the past 12 months. That's why I put TTM here. But sometimes you can calculate the price to sales ratio for the projected next 12 months based on their revenue. So each company that is publicly traded on the stock exchange has to report their revenues every quarter during a conference call and they tell you about how the company did in the last quarter. How much the revenue growth, how much their earnings grew, what are the guidance for the next quarter and what are the plans for upcoming years and things like that. So sometimes you might be able to find how much the company is projected to make in terms of revenue for the next 12 months or during next year. And that's where you can actually take that number and you can substitute that in here. So instead of putting the 12 trailing 12 month, you put the Revenue, projected revenue for next year. So for example, if a company this year. And throughout the whole year they made a 100 million and they said that they are projecting to make a 150 million next year. Well then you just take the market cap and you divide it by a 150 million. And this will give you the projected price to sales ratio for next year. And this is something you can do if you're trying to see whether based on revenue growth, the PS ratio will become lower or higher if you're planning to invest in the company. So something, something definitely to keep in mind so you can calculate it for the current, the PS ratio for the current time and for the future. Here I just have TTM. And the PS ratio simply tells us how much investors are willing to pay for every dollar of sales per stock. So just like PE, how p told us the, how much they're willing to pay for every dollar for earnings. The ps tells us that how much investors are willing to pay for every dollar of sales per stock. One downside to price to sales or one disadvantage is that it doesn't really tell us anything about the company's earnings. So whether the company is making earnings or not, it really doesn't tell us anything. So the other thing, as a rule of thumb about the PS ratio is that low PS ratio simply tells us that the company or a stock is considered undervalued. And a high PS ratio tells us that the company or stock is considered overvalued. And PS ratio is very effective in determining the value for high growth companies that are currently not turning any profits. So there's really, there might be more than two reasons, but really there's two reasons why companies are not really turning any profits at the moment. So either they're doing really, really bad and on the verge of bankruptcy or they got hit really hard with some incident or bad news. And they're not really making any profit at this time. So that's a red flag, definitely something to keep away from. It doesn't really matter whether they have the lowest PE ratio in the entire stock market or the lowest PS ratio, you should just stay away from that. That's a red flag. The second scenario is the company is a very high growth stock and they're at the early stages. And you know, for example, they just went IPO or they've gone IPO for a year or two, and they're continuously growing the revenue, but they're currently don't have any earnings. And simply the reason for that is, instead of turning profits, they just take the entire revenue and put it back into the business to help it grow. So that later down the line, like 3510 years from now, they can actually start making some profit and have somewhat that numbers from the top-line make it into the bottom line and start having net income and EPS growth. So that's why having using PS ratio is effective in determining value for high growth companies that don't have any profits yet. So if, if the company is doing well in terms of revenue growth, that this is a good scenario to actually use a PS ratio. One other thing I like to highlight is that don't use PS ratio alone on its own. So it doesn't really make sense to just look at a company, for example, Apple, and say that the PS ratio for Apple, let's say, for example, this 20 and immediately you say will twenties too high? Therefore, the company is overvalued. Know what you have to do is you have to use the PS ratio. You use it when comparing different companies within the same sector. So and don't just use PS ratio on its own user when comparing different companies, but make sure that companies are same in the same sector. So for example, Apple make iPhones. So if you want to compare Apple, let's say Apple has, as an example, PS ratio of 20 and you compare it to a company that sells food and they're PS ratio is five. Well, yeah, sure the PS ratio is five and is lower, but that really doesn't mean anything. It's not meaningful comparison. And just because that company that sells food as a PS ratio doesn't mean you should invest in that company instead of Apple that sells iPhones, right? They, they, It's not a meaningful comparison again, just to repeat. So what you wanna do, the better comparison would be, for example, to compare Apple to Google, because Google also makes phones, they make Android devices. So that's a much better comparison. And in that case, you want to look at the PS ratio of apple. You want to look at the PS ratio of Google. And then that will give you, because you're in the same sector, they'll give you a better comparison to see that whether the, which one is undervalued or which one is considered overvalued when looking at the ps ratios. Next, we have the PB ratio, also known as price to book ratio. And the formula for Pb is simply price per share divided by book value per share, also known as BBS for short. Now the way you can calculate book value per share is you simply take the total assets and u minus the total liabilities, and then you take the results and you divide it by shares outstanding. Now PB, that ratio simply compares the company's market value to its book value and accompanies book value is simply its net asset. So this is very important to understand and the company is book value. It can simply be calculated by taking the total assets and subtracting the total liabilities. And the numbers for total assets and total liabilities can be found on the company's balance sheets. So we can look those up yourself if you wanted to do the calculation. And the book value is also known as the total stockholder equity. So again, this number, you can look at the balance sheet of the company for one of the latest quarters that they reported earnings. And you'll see there's total stockholder equity on the balance sheets. So you can just look up the number and you don't really have to calculate it by hand. When it comes to making sense of the PB ratio lower PB tells us that. We're getting a better value from our investment as we are paying less of a multiple between the book value and the market value. So ideally PB ratio on there one is considered really, really good. But typically in the stock market is really hard to find companies with such PB values. And when you do find companies with really, really low values, you have to be very careful because you have to pay attention to the company's fundamentals for red flags because there is a reason or there might be a negative reason or a negative catalyst of why the valuation is so low and why that company so undervalued. And typically that brings the PB ratio down as well. So when you do find the company that you want to invest in or evaluate a company and it has a really low PB ratio. Do look at other aspects of the financials to make sure you don't see any red flags. Typically in the stock market, investors are willing to always pay a premium considering a company's future growth and revenue. So as this is the reason why it's really hard to find. A lot of companies with low Pb is because investors are always looking at future growth of the company, of future earnings and profits. And based on their estimation, they're always willing to pay a multiple or a premium on the book value. And here's an example. So if a company a, has a book value of 1 million and its market cap is 10 million. This tells us that the market value of the company is ten times its book value. And if you see that the stock of that company is being traded on the stock exchange, whether it's being bought or sold, it means that the investors are actually willing to pay ten times its book value when they're purchasing or buying the shares of that company. For example, the last couple of slides I showed you a formula, an equation to calculate Pb. And in this slide, I'd like to show you a different way of calculating this same PB value. And you can. Another formula or equation to calculate Pb is simply taking the market cap and dividing it by total stockholder equity. Now PB value or PB ratio, should not be used alone when evaluating companies. Low Pb could mean something is wrong fundamentally with the business. So this is again, where you have to watch out for red flags when you find companies with very low PB ratio. And PB can also be used to identify companies that have very, very high and hyped up prices with low assets. This is another red flag that you need to pay attention to. Now, hyped up prices can result from many different factors, such as catalyst or news, fear of missing out, short squeeze and et cetera. So oftentimes the stock price of a company doesn't necessarily I represent its fundamental value or its financial values or its book value. Because a lot of times prices can really get disconnected from actual reality due to many different reasons. If a company gets the really good news, you might have this dot gap up and continue going higher and higher for days to come, more weeks to come, or even months to come. But even though the ANY nothing with the company's assets has changed. So this is actually not a good thing because you're paying a lot, a lot of multiple here and you're not getting a good potential future growth on your capital. So those are some of the things that you have to be careful. This is where Pb, it can actually help when using the PB ratio. So sometimes good catalysts can drive the prices and disconnected from reality, sometimes fear of missing out. So for example, if a company is doing well, they report a good earnings for one quarter and all the sudden, there's a lot of people investing in it that drives the price up. And now you have all these other people who were on the sidelines or don't know what to buy, they jump in because they're kind of afraid that if they don't buy and now they're going to miss a lot of gains over the next few months or over the next few years. So then they pile on and now you have all these exponential growth of investors and possibly institutional investors jumping in and just driving the price parabolic. And the short squeeze n is another one. So short squeeze means that if a company has a lot of short interests, so a lot of people are investing money betting that the price will go down because of some negative aspect of the business, then what short squeezes is that if the price goes up due to whatever reason, as I mentioned, it could be a good earnings. The price could go up and investors are buying the stock. And as the price goes higher, the people who are actually betting against the price going, betting with the price going down. So basically shorting the stock. Those people are now going to have to cover because they're starting to lose money. The more the stock goes up, the more money they are going to lose if they have a short position in the stock. So then they have to start covering their shorts. And the way you cover your shorts is you have to buy back the stock. Because when you're shorting, you're really selling the stock and hoping to buy back at a lower price. And the difference is the profit you make. But now if the price is going up, you're as a, as a investor who's short, you're actually the negative. So you have to cut your losses and buy back the stock. This buying back the stock will again contribute to the price going higher and higher. 5. 5 Financial Measures: I've now covered most of the important valuation measures. Next, we're going to get into some important financial measures, starting with profit margin. And profit margin is simply a number in terms of percentage. So remember that when we're looking at this on the Yahoo Finance platform, and what profit margin is simply the formula for it is simply income divided by revenue. And both income and revenue can be found on the company's income statements. Now Profit Margin tells us about the financial health and growth of a company. It also tells us how much from each dollar of sales or revenue is making it into profit for the company. So it is important to recognize that not every dollar of revenue becomes profit. There's always costs associated to make that dollar or revenue or any amount of revenue. For example, you have to pay for employees of your company, you have to pay for sales marketing and advertising to get your brand out there for people to recognize your products and buy them. So there's always caused associating to making revenue. And typically only a fraction of that makes it into profits or earnings for the company. So for each dollar, typically only a few cents for each dollar of sales or revenue that the company brings in. A only a few cents of that makes it into profit. So this is where profit margin tells us that for each dollar of sales, how much of that dollar of sale is making it into profit for that company. And as a rule of thumb, profit margin, profit margin, anything above ten is good. Anything above 20 is considered really, really good. Next, we have the operating margin, and this is simply again, simply a number in terms of percentage. And the formula for operating margin is simply operating income divided by revenue. And again, these numbers can be found on the company's financial statements and reports. Now, operating margin tells us how much profit accompany makes for every dollar of revenue after paying the costs for to make that revenue, but before paying any tax or interests. Now as a rule of thumb for operating margin, any number above ten is considered good and anything above 20 is considered really, really good. X that is called Return on Assets or short for ROA. And again, this is simply a number in terms of percentage. And the formula for ROA is simply net income divided by total assets. Roa tells us how effective accompanies management is in utilizing its assets to generate earnings. And as a rule of thumb, for an ROA, anything above ten is good and anything above 20, it's considered really, really good. And the higher the ROA it tells us that the more efficient the assets are being used in order to make profits for the company. We have the return on equity or short for ROE. And again, this number is in terms of percentage. And the formula for ROE is simply net income divided by Shareholders Equity. And the way we can calculate shareholders equity is simply assets minus debt. And ROE tells us how profitable a company is in relation to its stockholders equity. Now let's pause for a second and talk about what stockholder equity is. Stockholders equity is simply how much asset a company has left over after paying all of its liabilities, such as debt. Now is a good rule of thumb. And R4 ROE, anything above ten is good. Anything above 20 is considered really, really good. But one thing to keep in mind is that we shouldn't use ROE on its own or just alone in order to make a judgment or make a decision based on the company's valuation. What we need to do is compare the ROE of the company we are looking at or valuing with other companies in the same sector. So for example, imagine you're looking at a company that's in the energy sector. And typically in the energy sector, most companies have very low ROEs. So if you're just looking at the company, you are looking at AUC ROE of nine and you say, well, this is below ten or 20, so I should dismiss it. Well, no, that's not a good sort of way to decide on whether you should make that investment or whether that company is really overvalued or undervalued, you shouldn't use it like that. You should actually take a look at maybe 102030 other companies in the energy sector first, look at their ROE, see how they're doing good, a good average from all of them. And then take that average and compare it to the company you are looking at. So for example, if the average of 20-30 companies in the energy sector all below ten, There may be, if you're looking at a company that has an ROE of nine, maybe that's not such a bad investment or maybe the company is not, you know, overvalued or considered undervalued or overvalued, right? So something to keep in mind here. Again, this is not a valuation measure, this is more of the financial measure. But what I'm trying to say is that when it comes to ROE, always try and compare it to the peers or the companies in the same sector. So first get a good sense of average and then compare your company you're looking at. It's ROE with the average ROE. Now, if you can't find that for whatever reason, another option you have is you can take the company's ROA that you're looking at and compared to the ROE of the S and P 500 Index. And the SMP 500 index is simply a collection of the largest 500 corporations in the United States. And other important financial measure is called currents ratio. And this is a really important one. And make sure you understand what this means. So that when we're actually looking at this number, you can make sense of what the situation for the company is. So the current ratio is simply compares, accompanies total current assets to its total current liabilities. And by current here we mean for the next 12 months. So not long-term, but more like short-term. And the formula for current ratio is simply total current assets divided by total current liabilities. Now as a rule of thumb, current ratio of higher than one is considered good. And current ratio of anything higher than two is considered really, really good because it tells us that the company has a pretty good handle of its debt and it's ensuring that the assets, our outweighing the total current assets are outweighing the total current liabilities, but at least two times a multiple or even higher. 6. 6 Live Example 1 Valuations: Okay, now that we have covered the definitions and terminologies of the most important valuation measures or metrics and statistics. It's time to look at some live examples. Now for this section or lecture, I've decided to compare two companies to growth companies side-by-side. And we can determine which one presents a better valuation. And this is a really great way of learning about how to value a company. And the important thing here is that I have both of them side-by-side. So what I've done is I've opened two browser windows. And I've know for each one I've navigated to the Yahoo Finance website. The first company we are going to look at is called tattooed chef, ticker symbol TTC f. And the second company we're going to look at is called Beyond Meat ticker symbol BY AND, and I've put in the ticker symbol in this window for tattoo CEF over here. And the when the when the information loads or page loads, I've clicked on the Statistics tab. I've done the same thing here on this right-hand side browser. And I've put in the ticker symbol beyond. And when the page loads, I've clicked on statistics. And now we have a pretty good side-by-side comparison between the two companies. Now, one thing I like to mention is that both of these companies are growth companies because they generate a lot of, a great deal of revenue. Because they're both at early stages of their life-cycle. And we'll see that later in this lecture. But another important thing is they're both in the same sector. So both companies actually produce or sell plant based products such as meat, plant-based meats. So tattoo chef a little bit about the company. They they've been around for a little while, but they've been doing up mostly private labeling. So for example, they produce the products and they sell them, but they sell them to big boys such as Walmart or costco. And then Walmart, Costco can put their own brand on those products so they don't get the recognition under the brand name tattooed chef. And recently they've decided to change that and sort of branch out on their own and sell their products on their, their own brand tattooed chef. And there's smaller company compared to Beyond Meat, they're fairly new. And if you'd like more information about either of these companies, what I suggest is you can visit their website and look at some of their products. Because looking at the products, ill tell you a lot of different things. For example, how much selection do they have? What kind of previews people have left for them? See whether they're highly rated or, you know, they're not as good. Or what kind of variety do they have in terms of meats selection, or, for example, do they have frozen food or do they not have frozen food? Do they only serve fresh meat? And what is the quality and things like that? So those are very important. There don't necessarily tie in directly when valuing, valuing stock price or a company, but it is in a way, indirectly, you're sort of trying to knowing some of those things you can actually make future projections. You can also order their products if you're vegan or vegetarian. Yourself, or if you're just someone who eats meat, or we'd like to try some vegan burger, for example, just to see how it is, what it tastes like, our curiosity, you can actually order the products as if it's good because if you like it, if you buy their beef, for example, and you make a burger out of other cheeseburger and you like it. Chances are other people are also liking it, which means p more people will buy it, which means more revenue and sales. So something to keep in mind, this sort of thing, always. It's a very indirect way of measurement when it comes to company valuation and helps you project a lot of things for the company in the future. And so that's it for Tad to Chef and then beyond me, raise similar company a little bit bigger and also have been a round a little bit longer. They have pretty much established their brand. You'll see them in different grocery stores, even not sure if places like McDonald's hamburgers with them. But I know I do know some restaurants have burgers or selling burgers under their name and you can buy them from grocery stores and so on. So they're a little bit bigger. They've been around a little bit longer. But both of these players are growth stocks or growth companies, and they're both in the vegan section. Alright, let's get started and look at some valuation measure. So we'll look at that to shift first here. So the first thing we're going to cover is the market gap. So as you can see here, let's compare them side-by-side. So the market cap of tattoo CEF is 1.49 billion. And remember, market cap is just the stock price subsidies shares outstanding. So this number does change directly. It's directly proportional to the stock price and the enterprise value for the tattoo chief company is actually 1.56 billion. So remember, integral is value. Actually a market gap is a measure, is in a sense that this is how much the company is worth if you were to put a dollar amount on it. But mostly from the stock market perspective. So all the retail and institutional investors in the stock market, or Wall Street in general. This is how much they think this company is worth at the moment, 1.49 billion. Now the enterprise value, if you remember, it actually takes into account not just that, but also the company's debt and also assets like cash and cash equivalents. So over here, this is a more accurate presentation of the company. If you do consider those things, market cap does not considered things like debt, short-term and long-term debt or cash and cash equivalents. It's just just the perception of what the mass market things, what everyone the stock market thinks this company is worth. This is a more representation of the company's valuation based on assets and liabilities. So I would say this is a more accurate measure. And what this is telling us is that looking at the market cap and looking at the inner plies value, this tells me that this company is a low bit undervalued because its 1.49 billion market cap, but the enterprise value is 1.56 billion. So already I can see that this company is presenting. Better, better choice for me at the moment because it is slightly considered undervalued because you're looking at these two numbers. And enterprise value, which is a more accurate measure of the company, is valuation is higher than the market cap itself. Normally. For growth stocks, this is the other way around. Market cap is always higher because as I mentioned, like price oftentimes gets really hyped up. So market gap goes higher than the enterprise value. In this gets scenario, we're actually looking at a situation where it's the reverse. So it's actually providing us with a bit of value situation and a good opportunity. Looking at the same thing at beyond me, you can see that the market cap is 7.83. So immediately you can tell that this company, you, beyond me, is approximately four times bigger than tattooed chef. So that's one thing to notice. This company is bigger than this company. And for good reason because they've been around for longer time and they've established a brand and they have more revenue. So, you know, companies get bigger and bigger over time. But here looking at the market cap and enterprise value, it's actually the reverse situation. So the market gap is 7.83 billion, but the enterprise value is, is 7.68 billion. So in this case, when you're looking at these two metrics or ratios, it's actually presenting a more of a overvalued situation because the market gap is higher than the enterprise value, unlike the thing, unlike what the situation we saw with that UHF. Now, the difference is not really, really high for us to be Dad concerned is just something I want to bring to your attention that this just comparing these two things, these two statistics, market cap and enterprise value, that this is showing us a sign of a bit of a overvaluation. Again, the difference is not that much. If this was 20 million and this was 7.6 billion, then that would sort of be a red flag of why is there such a huge delta between the two. But the difference is not that by 7.83 versus 7.68. And I just wanted to bring to your attention that there is a overvalue situation over here with that, to check, there is a situation where the stock is showing as undervalued. So something to keep in mind. X, let's take a look at the trailing P metrics. So as you remember, this is the price to earnings ratio, but trailing means TTM or the trailing 12 months. So the PE, the number this would represent is the price to earnings ratio for the last 12 months worth of information or data on the company's earnings. So right now you can see that tattoo chef is actually not showing anything. It's showing NA or not applicable. And this is simply because the company doesn't make any earnings right now or is not making any profit, which I mentioned earlier is actually ok. For the, for growth companies not to have a PE or a really high PE because they're still at the early stages of their development and they take all the revenue and put it back into the business to just make it grew and grew and grew. And at some point someone that topline number will make it into the bottom line and they'll start to have p's and b's usually start from really high. Work their way to become lower and lower as the company grows and makes even higher and higher revenue. So something to keep in mind and try to Chef here, it doesn't have any p e because in the last 12 months it did not make any earnings or profit. Same thing for Beyond Meat. For trailing PE. We're seeing NA or not applicable because they currently do not make any earnings. So completely normal. Both of them are growth stocks and both of them are still in early stages. So for them to not have an NA it's it's okay. It was a massive blue-chip company and they didn't have PII such as like Apple or Microsoft or Google, or Bank of America or any of those huge blue chips companies than I would be concerned if I'm not seeing a trailing PE here, that would be kinda like a red flag for me. And next, what's, the other thing we can take a look at is the forward p. So if you remember Forward PE is the forward-looking projections for the next 12 months worth of earnings. And both companies have numbers associated with forward PE. So it is projected by the analyst that tattooed chef will have earnings within the next 12 month. And based on those projections, the number is calculated to be 286.12. Now if you're looking at the beyond same thing, it is projected for them to make earnings or start to make profits and earnings within the next 12 months. And based on those projections, that P Forward PE is 543. Now again, another sign, forward PE for tattoo Jeff is 2864 would BE four Beyond Meat is actually 543. So if you remember as a rule of thumb that lower the PE the better. In this case tattoo chief has Beyond Meat still beat because the forward PE 12 months from now that actually have a P of 28612 from now beyond will have a p of 543286 is actually lower than 543. So which represents, again tattoo CEF is representing more of an undervalued situation compared to Beyond Meat. Because this number, the PE for this number is lower than the P for this number. So this is another sign that is showing us that investing money in the tattoo CEF company might present a better value for our investment and capital growth. Or if you just valuing the company, it would tell us that this company is more undervalued compared to Beyond Meat. Right next, let's take a look at the PEG ratio. So this is the PE, price to earnings to growth ratio. And over the five years, five next year's projected. As you can see, it makes sense because tattooed chef, again, on the left-hand side we have tied to Jeff and on the right-hand side we have beyond me. So just keep that in mind throughout the lecture. And as you can see, tattoo Jeff here on the left-hand side, it doesn't have any it doesn't have the number for PEG ratio. And I think that makes sense because they don't have a PE. So they can possibly. I'm actually calculate a number for peg. Now, on the right-hand side, we can see that there's a number here called or the value is 1.709 for the PEG ratio. And I'm not entirely sure how Yahoo Finance is calculating this number because again, I was expecting to see like an NA here or not applicable because it doesn't have a PE at the moment. So we're not sure how they're calculating this number. But one thing I've done is I've went to Morningstar. So when I went to Morningstar here on the other, another tab on the same browser. And I've looked up beyond meet here and I clicked on valuation. I'm looking at the PEG ratio here and it's showing me for 2020. It's showing me 4.04 and the current one. The TTM is also 4.04. So these numbers don't really align. And again, I'm not sure how these numbers are calculated because if the company doesn't have P in October, they're getting these from. So and the numbers are actually don't even match. On Yahoo finance, it was 1.709. Morning Star is showing me four or 4.04. So this tells me that it's not really a metric I can rely on. And just because even if Beyond Meat did have a PEG ratio tattoo, Jeff doesn't have a PEG ratio. And I've looked at that to Jeff on Morningstar here as well. And as you can see here in this same valuation tab for tattoo CEF in Morningstar, there's no such thing as a peg because PEG ratio because it doesn't exist. So what I'm going to do for this one is I'm just going to ignore it because it doesn't really make sense for us to compare peg to peg when one has a number and the other one doesn't have a number. So this is a scenario where I can't really rely on the valuation of the company based on the PEG ratio. So I decided to just skip that and move on to the next thing. Next, let's take a look at the price to sales ratio or the PS ratio. And this is one of the most important ratios to pay attention to when you're comparing growth stocks. Because as you saw earlier, neither of the company has P0 a value for the PE ratio. So this is the, this is one of the most important things we can actually use to go ahead and do some valuation comparison. Ps is really meant for growth stocks because it doesn't really look at the earnings or profits, is just purely sales, which is revenue. And over here you can see that the price to sales ratio for tattoo CEF company is 11. Now remember, I, as I mentioned, is like it's really hard to find very, very companies with very low PS ratios, especially for growth companies. But this is not. Again, we have to compare companies in the same sector. And as you can see here, the number four tattoo CEF, the ps is 11. Now the PS4 beyond me is actually 19.42. So it's almost double if, if you look at the numbers. So if this was, say around this down to ten and round this up to 20. So beyond me is actually doubled. The PS ratio for this is doubled. And if you remember. The lower the PS number as a rule of thumb, the better and it provides a better undervalue situation when you're looking at investing at a specific company. And here you can easily see now remember this PS ratio is not forward looking, is backward-looking, so it's looking at the sales over the last 12 months. So this is the PS4, the trailing 12 months or the past 12 months. You could also, if you know the companies projections revenue, sometimes they talk about that in the earnings call for next year. You could also go ahead and actually calculate that price to sales with the projected to get the forward looking price to sales. But in this case we're just looking at the TTL and the number four is 11 and the number for beyond me for ps is 19.44 to. Now looking at these two numbers, again, this is another sign or another metric that is telling me that tattoo CEF is actually creating a better opportunity here for investing because this is representing more of the undervalued situation when comparing this number 11 to 1944 to because this is almost half this number. And the lower the ps, the better. So this is another sign we can actually use to our advantage to say that tattoo chef company is actually looking pretty attractive from an investment point of view because we're getting more buck for bank or for our dollar steak. You look at the price-to-book ratio for both companies to see what sort of information it tells us. Now, if you look on the left-hand side here for tattooed chef, one thing I'd like to say, so this is the price to book or PB ratio. It has MR. q in the bracket here. So MR. Q stands for most recent quarters. So just keep that in mind. Just say TTM stands for trailing 12 month, MR. Q stands for most recent quarter. But as you can see, the number four Pb is actually N a. Now, I don't know why this number hasn't been calculated on this platform. Sometimes Yahoo Finance lags, other platforms, or sometimes they have delays in calculating the information. After all, it is a free platform, so we can't really ask that much of it, but what you can't do is look it up in other platforms and see if in fact it's, it's, there's no number for it, or is it just Yahoo Finance that doesn't have that number? That's why we initially covered 23 different examples. Now you can go to one of those. So you can see here there is a price to book of 20.634 beyond meat. We can't really do anything with this number because we can't really compare it to an a here for price-to-book to tattoo CEF. So what I've done here again, I've opened a new tab in the browser and I went to Morningstar and I put it into two CEF and I've done the same thing for Beyond Meat here. And as you can see, there is actually a price to book ratio here For tattoo CEF. Now, the only thing that we have available to us as analysts is this current column here, which current I think might be TTM or last 12 months. I mean, the number is calculated based on those numbers. Or historical data. And as you can see, the price to book four tattoo CEF is 8.47. Now I want to compare the same 12, the price to book of Beyond Meat. So over here, if you look the price to book, we're going to look at the current one here. Current column is actually 20.64. So this number is actually for Beyond Meat is actually more than doubled. So this is 8.47, this is 2.6 for the, for the PB ratio is between the two company. And if you remember previously, as a rule of thumb, the lower the PB, that better. And we just have to be careful that there's no red flags with the company's financial. So very important to keep in mind, but right now looking at both numbers, the number for tattoo chef is actually much lower than the number for Beyond Meat. So again, another piece of information from looking at the statistics and ratios that is currently telling us that tattoo CEF is presenting a better opportunity because it's telling us that it is more undervalued compared to Beyond Meat. Which means that if we were to invest our money, there might be a hire potential gain for our capital. So this is the comparison for price-to-book between the two companies. The next valuation measure or ratio we are going to use is called enterprise value to revenue or EV to revenue. And this is simply a number or a ratio that compares the company's enterprise value to its revenue. And the formula is pretty straightforward here. This is enterprise value divided by revenue, this number here, enterprise value can be found on top here. And the revenue is same as the top lines or, or you can just look at the number in the income statement financial report. So when you divide enterprise value by revenue, this is the number you get. So in this case we have tattooed chef sitting at 11.464 this ratio. And if we compare this number to beyond me, you can see that the EV to revenue for beyond me is 19.05. So as a rule of thumb, the lower this number, the better because it presents more of the undervalued situation. So in this case, when comparing the two companies side-by-side, you can see that tattoo CEF here has an EV to revenue of 11.46 and beyond me has an EV to revenue of 19.05. So you can see that tattoo chef has a lower ratio of EV to revenue compared to beyond me. So in this case, this is, this is one of the signals that tells us that tattoo chef is actually more undervalued compared to Beyond Meat. So again, this presents a good opportunity if we were interested in investing in the stock, if he were to choose between the two. So this is something to know. And also another way you can look at enterprise value to revenue is it's simply a multiple so that you can figure out a fair value of a company from an acquisition point of view. So let's say, for example. You have some money and you want to buy out a business or by a company out right? Now, instead of just using something like market cap or instead of using a ratio like PE to determine fair value, this is a better ratio to use. In a case you are trying to acquire a company in order to tell if it's undervalued or overvalued because enterprise value takes into account the company's assets and liabilities as well, whereas p does not. So this is, this is a good ratio to use from an acquisition point of view. But for us or analysts who want to value companies or investors who want to invest in stocks. Or specifically between these two companies or in this sector. The only thing we need to know is that the lower the number, the more of an undervalued situation it presents itself. So it makes it more attractive from an investment point of view. So always look for a number that is lower. And in this case we can see that tattooed chef actually beats beyond me that by beets, I mean, it actually is undervalued compared to beyond meets when you're comparing these two ratios. Last valuation metrics in this section we're gonna look at is called enterprise value or EV to EBIDTA. Now, let's talk about what EPA is. So EBIT stands for earnings before interest, tax, depreciation and amortization. So this is the earnings before paying, paying those expensive. So it's not net pure profit, it's actually just Earnings Before paying those expenses. So this is something to keep in mind and this is just EV to EBITDA. And again, this is another multiple and evaluation measure ratio we can use in order to determine whether a company is fairly value and whether it is healthy. And over here, one thing we need to know as a rule of thumb is again, just like the other ratio here on top, EV to revenue. The lower, the lower this number, the better. So if this number, the lower this is the better. So let's compare that to, let's compare the EV EBIDTA or EV to EBITDA of tattoo chef to two EV EBIT of Beyond Meat. And as you can see that for tattoo Chef, this number is one hundred and four hundred sixty three. And for beyond me is actually wow, it's 10,989. So huge difference. And this is again another sign in terms of valuation that tattoo CEF is more on their valued when comparing two Beyond Meat. So remember, this is a huge difference here. And again, remember as just as a rule of thumb, the lower the number, the better. And one thing I like to highlight is that the difference between these two ratios here is that EV to revenue looks at the company's ability to generate revenue, right? That's what this metric tells us. And enterprise value to EBITDA tells us about the company's ability to generate operating cash flow at this metric here also looks at operating expenses. This matrix does not look at operating casual or operating expenses. Each is purely looks at the topline or also known as revenues. So it looks like just this one looks just at the revenue. This one looks at companies ability to generate operating cash flow. And it does take you take into account the operating expenses required to make that cashflow. So. Really the difference between these two ratios. One thing to keep in mind is that for high growth companies that are still at the early stages that aren't really producing any profit or any income or earnings they EV to revenue is a better metric to use when we're trying to evaluate where we are trying to, trying to value or determined a valuation of a given stock price or given companies. So just something to keep in mind. This ratio or metric here is a better one to use between these two when it comes to actually determining valuation for companies that are growing rapidly, but they haven't yet produced any income or profit. Recap here, we've now gone through all of the ratios on the valuations measures section. And so far up to this point, everything has been telling us all these ratios has been telling us that this company on the left tattooed chef company is actually has a better or more attractive valuation when comparing it to the beyond meat company on the right-hand side. So There's several ways you can look at this, right? So if you're doing valuation, you can think of as an analyst, you can think if you're doing valuation or financial modelling, you can say that this company is actually has a better valuation or it's undervalued as an, if you're an investor and you're trying to invest money in either of these companies, it looks like tattoo CEF is actually providing a better investment because it tells us that it is undervalued. So long-term may be 23510 years down the road. We might be able to, and it might able to appreciate our capital and gives us a lot more gain back when comparing two Beyond Meat. Now, I'm not saying we should go ahead and buy the tattoo CEF stock or a put money in it. This is just for informational purposes only and is just educational purposes so that you can learn how to value or determined valuation of companies side-by-side in the same sector. So looking at all these ratios so far, everything is pointing that. And it tells us that the company tattoo CEF has a better valuation. Now, it's up to you how you want to interpret that. You can think that tattoo CEF is actually undervalued compared to Beyond Meat. Or you can think of it as beyond me being more overvalue to tattoo CEF. So either way, tattoo chip is actually providing a better opportunity. But also note that tattoo HF is a much smaller company. So it is it might have some risks that because it has a market cap of 1.5 billion, as to be honest me, is market cap which is almost 8 billion. So There's some hidden risks involved with companies that have smaller market gaps and beyond me, it has been a, has been around a lot. But just focusing back on the valuation metrics over here, we can see that tattoo chip is actually providing a better valuation. So that's just to do a quick overview and recap. And now that we've covered all the valuation measures, let's jump into financial highlights. 7. 7 Live Example 1 Financials: And it comes to stock price valuation or company valuation. Financials play a very important role because sometimes if the company is not making any profits, then you have to resort to valuing the company or stock price based on other measures, such as revenue growth, which can be found in the financial section. So here we're going to go through the financial section and do a quick overview side-by-side to compare the company tattoo chaff here ticker symbol TTC f, with the company beyond meat. And here, again, I've loaded both companies on Yahoo Finance. I have two browser tab side-by-side. And we're looking at the statistics tab for both. So let's go ahead and scroll down here to the financials highlights section for both companies. And the first thing we can take a look at here is the information about the fiscal year ends and the date December 31st, 2019 in this case. And it's the same bait for beyond me, December 31st, 2019. Now, this is just one thing to bring to your attention is that most companies have the same fiscal year end as of December 31st and the year would be the year you're actually looking at. But there are some companies that don't have this fiscal year of December 31st, so it's not necessarily the end of the year. They could have the companies could and their year on different dates. So something to keep in mind. And over here, we got the most recent quarter for short, MR. q. So wherever you see the word MR. Q, or the abbreviation MR. Q, stands for more most recent quarter. And in this case, the most recent quarter that the company reported earnings for was the September 30th, 2024 Beyond Meat here, it's September 26 up to 2020. So not on the exact same date, but very close. Within the same month and apart within a week or a few days. So now that's just dates to keep in mind. And now we can move into the profitability sections. So over here we can see that tattoo chief on the left-hand side has a profit margin of 3.19%. If you remember, anything above ten is good. Anything above 20 is great and excellent. In this case, this number is below ten, so not that great, right? If you're looking at a number below ten, especially on the lower inside, which is this case here three. This is not a great number. Same for operating margin. So this is 5.25, again, less than ten, not a great number. At least though one thing to notice is the numbers are positive. It means that the profitability of the company is on the right track and the company is making profit. But if he head over to the right-hand side here for Beyond Meat, you can see that the numbers are actually negative. So this is a, this is not a good sign. From a company's perspective or from the outside perspective, someone who's trying to value or invest in a company here, this number is being negative, which means profit margin minus 6.97 operating margin. Ttm trailing to apply for the Passover is minus two. So these numbers being negative tells us that the company is currently not making any profits. For that to shift, the company are actually making profits, which is great, but the numbers aren't as what we want them to be. Again, above ten is really good. So at least this puts tattooed chef ahead of Beyond Meat here because in terms of valuation for myself or in terms of financials, at least looking at these two, I can see that it's safer to go with the company who's currently actually making some profits. Alright, now let's head to the management effectiveness section. And over here on the left-hand side you can see that we have two attributes, return on assets for the past 12 month and return on equity for the past 12 months. So here you can see that for the company tattooed chef, there is no number recorded here, so it's NA or not applicable. So we don't have any data on this now. It could be for different reasons, may be Yahoo Finance, it's just lagging and it hasn't recorded the numbers. Or maybe perhaps those numbers are actually nonexistence, so there's really nothing to report. Now, heading over to the right-hand side for beyond me, we can see that the return, return on assets for the past 12 months has been minus 1.42%. The return on equity for the past 12 months has been minus 7.44%. Now, if you remember, this is actually not a good sign because if you go back earlier in the course, we wanted these numbers to be positive and we want it to be, we want them to be as high as possible. So again, anything above ten is good. Anything above 20 and higher is fantastic. So in this case, not only they're not positive that actually negative numbers and they are not that high. So ideally, again, we want to see this number to be positive because in this case it shows these are the measures on management effectiveness. And you can see that return of assets, the management has to sort of utilize the assets of the company so that they can actually bring in profits. In this case, they're actually losing money on the acids, so they're not being quite managed efficiently. So, but it doesn't mean that the companies are a good company to invest in all these negative number doesn't mean that the company is about to go, go, go bankrupt or anything like that. So we can draw a conclusion from this immediately. So just one thing to be mindful of that we do want these numbers to be positive and we do want them to be high. Now, in this case, looking at both of these companies, obviously, you can probably guess that we can draw any meaningful comparison or measures by looking at these two, because one company doesn't have the numbers, the other company has the numbers but their negative. So at least if this company had to shift company on the left-hand side had a number here. We could do some meaningful comparisons. In this case, we can, so we can really rely on these measures when comparing to accompany side-by-side. Now, before making, before coming into that conclusion, one thing I would do is I would go to different platforms other than Yahoo Finance or different websites. And look to see if I can find these two things on there. So return on assets and return on equity. If those numbers are exist in and they're just recorded on other platforms and they're not here on Yahoo Finance, then I will go ahead and do the comparison between these two measures here as well. But right now, going to leave that up to you. So that's something you can do as a quiz or exercise. And over here, we're just going to draw the conclusion at the moment that we can't really reliably draw conclusions by looking and comparing these two numbers, then that means that we can just ignore these for now and move on to the next section, which is the income statement. But now let's head over to the income statement section and compare some numbers. So the first thing on the first row on the income statement here on the Statistics tab is the revenue for the past 12 months. And you can see that for tattooed chef, that revenue was a 135.7 million and for beyond me, it was 403 million. So obviously the revenue for Beyond Meat is bigger because Beyond Meat is a bigger company. And you can easily tell that by going on the top here are looking at the market gap. So beyond meat is actually sitting at a market cap of 7.4 billion and tattoo CEF is sitting at a market cap of 1.7 billion, so it's a much smaller company. So that does make sense that the revenue is actually lower. So let's go back to the income statement here. So revenue, we saw that revenue, right? And here's VC revenue per share. And over here, any, anytime you just see something per share, like revenue per share or other things which you'll see later in this section, we will cover them, but pretty much what they're doing is they're taking the number, like, for example, revenue and just dividing it by the outstanding shares. So nothing really special about that. So we'll just cover the most important things or rows in this section. So revenue was one will ignore this revenue per share. Here's another very important measure here. So quarter quarterly revenue growth year over year. This is a very important measure. So this is saying that this quarter last year, this time last year, how much the company made and how much the company is making a year later during this same quarter, right? So quarterly growth year over year. And over here you can see why, oh, why stands for year over year. So over here you can see that for tattooed chef and the company growth or grew, grew revenue at 65.3%, which is a huge number at this is a really great number to see. Just remember one thing. Smaller companies can grow revenue faster than bigger companies, right? But they can grow faster, accompanies for many, many years. And as they become bigger and they, it's, it gets harder for them to innovate then the revenue growth. Becomes more steady, right? They, they actually go and grow revenue, add much stare year rate. So over here we can see that the growth rate of revenue growth for tattoo shift is, is a huge number. This is great to see heading over to beyond me. This number, we can see that it's 2.7%. Now, it is true that Beyond Meat is actually a bigger company that had two chef. But beyond me itself is also, it's not a company that has been around for, for example, 20 years. It's still relatively new. It's older than that to check, but it's still pretty new in the industry and in the market. So It's a little bit disappointing to see this number for myself. I would like to see a number that's a lot bigger than this. Like I would say, minimum ten to 20% is pretty much average. Ten to 15 or ten to 20% is sort of like an average. Seeing a company grow their revenue by 2.7%, it's pretty low. So for me this is if I had to value a company based on the information I have over here, because tattoo chef is growing the revenue more by a huge margin here, sixty-five percent versus 2.7%. I would probably choose this company over beyond meat in terms of valuation and say, this company has a better valuation that Beyond Meat, just by looking at those two numbers, right? And it tells me that tattooed chef actually has it is considered a growth company. So the fact that a doesn't have P, As we saw earlier, because it doesn't have earnings yet. It's okay. Like the fact that it doesn't have earnings, it's OK. Over here, I would like to see a higher number four beyond meets revenue growth year over year. But again, don't draw conclusions solely from this number. It doesn't mean that the company is actually become a bankrupt or heading in the wrong direction. But ideally, you do want to see companies grow their revenues by a much bigger margin that this. So let's move on to the next thing here. Next thing we actually looking at here is gross profit for the past 12 months. So you can see that for tattooed chef, that gross profit as been 13.71 million and the gross profit for Beyond Meat was 99.76 million. This is a good number to see. And obviously you can see that the Beyond Meat has a much higher gross profit. But again, this does make sense because they are bringing their bigger company than tao2 shift and they're bringing a lot more revenue here, right? There being a four or three, and that HF is bringing in a 135 million. And that's why the more revenue you bring in, the more profits you would have as you cut your costs lower and lower. So over here, you can see that beyond me it has a better gross profit. But again, this is just because the company, this company is smaller. A, B can really make a good comparison on valuation based on just these two things. But it's great to see that beyond me to actually does have. A higher gross profit because if you're looking at here and I'm just purely rounding the numbers here. The revenue for the past 12 month was 403. So let's say, let's just call this 400 billion flat. And gross profit was, let's call this 100 million flat. So out of the four hundred million, a hundred million of it became the gross profit for the company. So the other 300 million was spent on different things such as the cost to produce that revenue rate, so and so on. So over here, about four. I would say it's, the ratio would be four to one. So 1 fourth of the revenue actually made it to gross profit for Beyond Meat. Then if you look at the numbers for tattoo chef here, let's call this 1.3.6 and let's call this 14. So if feeded by 1.3.6 divided by 14, that gives us roughly about 9.7. So let's just round that up and say ten. So 1 tenth of the revenue is actually making it into gross profit. So this is not a good sign to see from tattooed chef because over here we're seeing 1 fourth of the revenue making it into gross profit over here for tattoo CEF, actually seeing that 1 tenth of the revenue making it into the gross profit. So this is sort of like not a good sign in terms of valuation for the company tattoo chef. But one thing we have to be mindful of is we have to go. One thing I would do as a next step is that I would have to go and look at the financial statements of the company tattooed chef, and see where the remainder of that revenue is going. Maybe they're actually spending a ton of money and spending a ton of that revenue on sales and marketing and X capital expenditure. So that actually expanding, maybe they're making a new plant to make more products or they manufactured products faster. Or maybe they're spending more money on R and D to come up with more products, right? Or maybe they're building a website to sell their products, right? We would have to go and read the financial statements to see where, why is it only that 1 tenth of the revenue making into gross profits? Where's the rest going, right? And if it's going into growing the company to become bigger in the future, that's OK. But if you can't figure out if the money is being spent on things that they accompany or management shouldn't spend on, then that's a red flag. And that's something we have to be very, very mindful of when we're evaluating companies. And one last thing here. So after gross profit, the last important thing we can talk about is EBIDTA. And evidence stands for, it's very simple term. It stands for earnings before interest, tax, depreciation and amortization. So you can really think about it as just Earnings Before the cost that you'd have to subtract from it, right. And over here you can see that for the company tattoo CEF is 7.99 million. So let's just round that up and say eight. And over here, the EBIDTA for Beyond Meat is actually 700 thousand. So you can see that there's a huge difference between beyond me, Beyond Meat is much lower. Their earnings is actually a lot lower than the earnings for tattoo CEF. And this is not a good sign because this company is smaller and it has a much more higher EBIDTA than beyond me, which is a bigger company than tattoo CEF. So this number is a little bit seeing this is a bit of a red flag for me and it's a bit concerning as someone who wants to invest in one of these companies or someone who is trying to value these companies. I would favorite this company tattooed chef over this bump by just looking at these numbers. Looking at 8 million versus 700 thousand. And again, one thing I would do is again, head over to the financial statement, go through those and see why is it that the earnings for the beyond me so much lower than the earnings of tattoo CEF here. So just remember one thing, what EBIDTA stands for and when comparing the numbers, this is sort of concerning number for me, but we have to go and see where the rest of the money is going, right? If it's going to help the company moving in the right directions, that's okay. If not, that's a red flag and we have to consider that in our valuation measures. Now we're actually taking a look at the balance sheet section and you can see the, on the left-hand side for the company tattooed chef, they have a total cash and this is as the most most recent quarter earnings report, they have a total cash of 3.18 million. Now looking at the balance sheet for Beyond Meat here, you have a total cash of 214 million. So beyond me has a lot more cash on the reserve, which is a great thing to see. They're actually loaded, that's a lot of cash. So this is a good number to see. They have a lot more Kashdan tattoo CEF, so they have a pretty solid balance sheet here. And you can see here for tattoo check, their total debt is actually 22.72 million. So that's, that's, that's a big number for a company of this size. But let's compare that to the total debt of Beyond Meat here. And you can see that beyond me it has a total debt of 64.13 million. So again, this is a big number. So this is almost, if we round things up roughly, this is almost three times the depth of tattoo CEF. So at first glance you might think that tattoo CEF is better in terms of balance sheet because they have less debt, right? Well, that is true, they have less debt. But take a look at the current ratio here. So if you remember earlier from the course, we want, we want the current ratio to be above one. So anything about what is good? Anything above two and higher is excellent, right? Take a look at the current ratio here. The current ratio for tattoo CEF is actually less than one. So this is not a good sign. This is not a bad side, but it's not a great sign either because it's less than one. If you look at the current ratio for Beyond Meat here, it's 8, 5-6. So. Not only is about one, it's a way higher than two. So this is, this is a crazy number and this is a really, really solved that number to see in terms of current ratio. Because looking at this ratio, you can easily tell that the company's total, as companies current total assets are way the company's total, current total liabilities by a huge factor, right? This is very important to see. So looking at this now, take a look at the, again, take a look at the total cash here. This is the, this is one thing I want to bring your attention to because looking at the total cash of beyond meat, they have 214 million of cash that they could work with. Right? Now, look at their total debt is 64 million. So yes, it is true that the debt of Beyond Meat is three times of the tattoo CEF debt of tattoo HF. But look at how much cash they have. They have 214 million. So if they wanted to, they could easily pay the 64 million worth of debt with this cash and still have plenty of cash left over, right? Can we say the same thing about tattooed chef? They have a debt of $22 million here, right? 22.72 million worth of debt. And they only have 3 million in cash. Can we pay 22 with three? Of course not. So this is actually a bad sign when looking at a balance sheet, right? So when comparing the two company's balance sheet, I would say in terms of valuation that Beyond Meat has a much more solid and much better balance sheet than tattoo CEF. The last section of the financial highlights section is called the cashflow statements. So the first thing we are looking at is operating cashflow for the past 12 months. So operating cashflow simply means that the cashflow or the cash amount of cash the company is bringing in from It's day-to-day operations. Now, the number, if the number is positive, it means that it's an inflow of money. So the company is actually bringing in cash, which is a really good thing. And you want the number to be positive and you want the number to be as high as possible. If you see that the number is negative, it actually means the outflow of cash. So the money leaving the business, which is not a good sign, you want the company to always, continuously increase its cash position, right? So over here we can see that the operating cashflow for tattoo shift is positive, which is a good sign to c. That means the money is coming into the business. And that number is 3.47 million, which is not bad. It's a good number to see for a company of this size. And if we compare that with Beyond Meat here you can see that the operating cash flow for the last 12 months is actually minus 71.39 million. So again, this number is negative, so this is not a good sign because it tells us that the business is actually losing cash, right? They're not bringing cash, they're actually losing cash. That's what the negative is. And the next attribute here is called leveraged free cash flow. And the meaningful leveraged free cash flow is simply the amount of cash the company has left over if they were to pay all of their obligations, like financial obligations such as dead and things like that. So over here you can see that for tattooed chef, that number is not available. Again, could be because Yahoo Finance is lagging. To record that number or edges means that simply this number is nonexistent and there is nothing to report heading over to leverage free cashflow of beyond me, that number is negative 92.48 million. So again, this is not a good thing to see it again, it means that the company is, instead of making money or bringing in cash, they're actually losing cash. The cash is leaving the company, so this is not a good thing to see. So looking at the cashflow statement, I would favor the company on the left here to Jeff because they have a at least from their day to day operations, they're making they're bringing in cash right beyond me looking at this number tells me that they're actually losing cash over the last 12 months from their day-to-day operations. So again, just to summarize, if I had to favor one over the other, I would favored the company, the beyond me its balance sheet on the right-hand side over the balance sheet of that to shift. But on the cashflow statement, I would favor the when it comes to valuation, of course, I would favor the tattoo CEF cashflow statement compared to that Beyond Meat cashflow statement. 8. 8 Live Example 1 Stock Price History: Alright, in this section, I would like to cover the trading information section of the Statistics tab in Yahoo Finance. Just one note I would like to bring to your attention is that this section doesn't necessarily cover things around valuation. It just covers the stock price history, some price actions and moral, the technicals, and not so much the fundamentals, but there are some information or some insight you could potentially draw from the information in this section. And I thought it'd be nice to cover it with you in this course. So for the most part, all the statistics you see under this stock price history section are pretty self-explanatory. And again, as I mentioned, it's not necessarily around valuation, but there are some conclusions you can draw or there are some insights you can gain when going through this section. So let's go ahead and cover them in the course. First thing you see in the list here is called better. Now, what better is, is you can think of it as a measure in terms of volatility. So how volatile the stock price has been compared to the general market. Now, as you can see on the left-hand side, and the bracket it says this number is calculated based on this timeframe, so 5-years monthly. But unfortunately, you can see that for the company on the left here, Tad to check, there is no better recorded or that number is not available. So that means that Yahoo Finance just shows us as NA or not applicable. And same thing for Beyond Meat. So we can see that this number is not available or is not recorded in Yahoo Finance. So unfortunately, we cannot do a side-by-side comparison between these two. But since we are covering in the course, let me tell you what it is. So again, beta is a measure of volatility. So for example, let's say that this better here for this company. Let's say it was 1.2. So what does that mean? 1.2 means that this stock, or the stock price for this company is actually 20% more volatile compared to the general market, for example, the S and P 500, right? When we're comparing this company to the overall market, the stock has been 20% more volatile, right? If the beta is 1.40, it means that this stock is 40% or has been 40% more volatile, right? And you can see that how this is the timeframe, it's actually being calculated. So this is really all you need to know. So if you see a number that's pretty high, like 1, say 1.80. That means that this dog is 80% more volatile compared to the general market, which is pretty high, right? If we see something lower than that means it's been less volatile. Again, it's relative, it's, it's comparing it to the general market. So that's very important to note. All right, next up we have 52-week change. Again, a very self-explanatory. So this is simply saying over the last two, it just tells us, gives us some insight that over the last 52 week, which is also a year, how much the stock price has changed in terms of percentage. So remember this numbers percentage rate. So how much this dog has gained or how much it has lost in terms of percentage. So 52-week change for tattooed chef company, it's been a 143.55%. And note that this number is positive. It means that the stock price has gained this much, which is a huge number actually, right? Over the last 52 week. Right, over the last year. So over here. And again, this is relative. It's not fiscal year ending December 31st. This is over the last 52 week. So it's just all relative depending on which when in time you're actually looking at this number. So over here, you can see that this number is pretty big. So the stock price has actually more than doubled over the last 52 week, which is a pretty good gain in terms of stock price. Now this is for tattooed Chef. Let's compare that to Beyond Meat here. So you can see on the right-hand side, the 52 week change for beyond me is actually 8.45%. A little bit disappointing to see, because if you compare that to the market, so for example, the S and P 500, which is an index that has the collection of the largest 500 corporations in the United States. If you compare the SMP 500, would this, the SMP 500 typically goes up by around somewhere between 12 to 15, 15% percent being a really, really good year. But typically around, historically, if you look at the numbers, is somewhere around maybe 1012, 15% is what the gain is or the annual gain is for the SMP 500. So when you're looking at a 0.45, this is actually underperforming. Companies, underperforming to the overall market or to the S and P 500, which is actually not good. And if you compare that with the tattoo CEF, well, the stock price here is actually it's gained. It's gained a lot of lob or value or appreciation. This awkwardness is appreciated and it's gone up. It's doubled, more than doubled. Over here. This thing has gone up by 8.5%, which is not that great. Now, it is true that as the company gets bigger, it is hard there for them to get more innovative and to grow revenue. And, you know, more things usually stabilize and they get steady as the company gets bigger and becomes a blue chip companies such as Apple, Microsoft, Google. And that, those sort of, those sort of blue-chip companies. So this is actually a little bit disappointing to see because I would like this number to be actually above 15%. Because 15% is really the benchmark here, like the SMP 500 gain. And if you're buying this company, you're actually, if you're, if you're looking to invest in this company, you are actually wanting to out perform the market. So otherwise you would just put your money in the S&P 500, like SMP index fund or an ETF. So over here we are seeing that this is underperforming, which is not a good sign. But on the other hand, tattoo chef company, stock price has gained a lot of value over the last 52 weeks. So this is something you can think about if you're comparing the two companies, right? The next statistics over here is the SMP 552 week change is really nice to have this number because as I was mentioning earlier, you can actually now run a comparison between the two, right? So if you look at the 52-week change for the tattoo chief company on the left, it's a 143.55%. If you look at the S and P 500. 52-week change, which is usually served as a benchmark or as a baseline that you can compare two industry benchmark. And you can see that the S and P 500 gain was because this number is positive. Remember positive means gain, negative means loss. So the S and P 500 Index has gained roughly about 13.447% over the last 52 weeks. So this is the, again the baseline. And you can see that the tattoo chef has actually beat that by a huge margin. It's actually beat up by a lot because it's a 143%. This is 13%. So this is doing great. This company that you chef is doing great in terms of outperforming the market. Heading over to Beyond Meat here you can see that the S and P to S and P 552 week change again, it's 13.47. But as I mentioned, you can see that the 52, we change was a gain of 8.45% for beyond me. And if you compare this number to the benchmark, this is actually underperforming the market, which is not a good sign for a company. So, but it's nice that they, Yahoo Finance is platform is actually putting this number here because you can do a direct comparison, insulate their right here. And you can quickly tell whether something is underperforming or pretty much in line with the market or outperforming it. And the next few statistics over here are pretty similar in terms of for the, for the company. So in terms of statistics or 52-week high. So this says that over the last, Again, we're looking on the left-hand side. So this is for that to Jeff. But over the last 52 weeks, This was the high So this was the all-time high. 27.80 was the all-time high for this company and the 52-week low. So this is the lowest point, this is the highest point. The lowest point was 10.33. So in the last year, at some point, it doesn't give you a date. Says at this date or on this day, it was 10.3. It just giving you a general idea over the last year that this was a lowest 0.10.33. This is the stock price, right? It's not a percentage. This is a dollar amount. So 52-week low was $10.33. That's how much it was the stock price. And this is actually the 52-week high. So over the last year, the highest stock price has ever gone was 27.80. Now, if you wanted to figure out exactly how when these, when the stock price, when the price was at this amount. You can just refer back to the charts and you can pinpoint the date if that's something you're interested in. And again, this is the tattooed This is for the tattoo chief company looking at the 52-week high for the for the Beyond Meat company, you can see that there was a 197.50 and the 52-week low, you can see that it was 48.18. So quite a big difference here. Quite a big delta from almost two hundred, two fifty dollars. So there's a really wide range here. Again, this is not necessarily around valuation, but this just gives you some information about the technicals, right? If you're looking at the chart. Or if you seeing how volatile or what the gap is over the last year, this gives you that information. The last two statistics in this section are again around Moro, the technicals and not necessarily fundamentals. If you're really interested about these things here, I do have a course on technical analysis in the stock market and investing. So please do check that out if you're interested in technicals because I get into a great amount of detail about things like moving averages, what they are, how they're used, and things like that. But over here, if you wanted to simplify things, you can see that there's a number for moving average. Now, I'm not sure if this number would mean anything to you. So it says the 50 day moving average is 21.18 and the 200-day moving average is 19.106, right? So again, 50 days, 50 days, talking about the last 50 days, average 200 days, the last 200-day or trading day, we should say, average, right? It doesn't include weekends because the markets aren't open so you can't really trade. This considers the trading days. So that's something to keep in mind. Now, immediately looking at this number, it might not really mean anything to you, right? This is where you're actually looking at the chart and visualization could help you better understand these numbers or actually draw conclusions or get some insights of what these things mean. But over here, one thing I can tell you is that again, both numbers are positive and you can see that the 50 day moving average, this number is higher than this number. So if you were to plot these on the chart or the graph, this would be above this, right? When the 50 day moving average is above the 200-day moving average, it means that the stock isn't an up trend. It means that it's slowly, the stock price is slowly going up. And that's exactly the case here. You can see that. And over here, the 50 day moving average is 21, the 200-day moving averages 19. So you can see that this number is higher than this. That means the 50 day moving average is actually above the 200-day moving average, which means the stock is on an up trend. Let's head over to be on meat and see if that's the case. So we can see that the 50 day moving average is a 133. Again, remember, this is the average for the last 50 days, right? And you can see that that's a 133.56 and the 200 is actually a 141. So this is the opposite. Did the 50 day moving average is below because this number is lower right? Below the 200-day moving average. What does this tell us? This actually tells us that Beyond Meat is in a downtrend, right? Because this number 50 date is lower than 200-day moving average. So this is how you can draw some insight from looking at these numbers, right? And that's a huge difference. One stock is actually on an up trend. One stock is on a downtrend, right? So if you're trying to get your money that you can sort of make some decisions based on what you see in front of you in terms of trend, right? Operand means a lot of people are probably starting to buy and the stock price is slowly going up and downtrend. Maybe people are slow, slowly starting to sell. And this talk is actually going down, right? So these are some of the things you'd have to think about when you're thinking about technicals. Again, it doesn't really mean just because this is on a downtrend. It doesn't mean that beyond me, there's a bad company. Again, this is not more around valuation, this is more around technicals, right? For example, may be if you wanted to invest in Beyond Meat and now it's in the downtrend. Maybe this is actually providing more of a better buying opportunity for you as an investor. If you did all your research and you decided to put your money in beyond me, it come as opposed to other companies, right? So always have to consider these things and not just immediately draw conclusion over here though, the important thing to note is that by looking at these numbers, you can just tell which one is an up trend, which one is in a downturn right? Now, if you wanted to get more details, I would suggest actually plotting a 50 day moving average and a 200-day moving average. On the chart itself. You could do that in many different platforms. But over here you can see that Yahoo Finance has a chart. So you can click on Tab and draw those things and see how they look like visually and see if that actually can help you get more insight from the chart itself. But that should cover it pretty much for this section in terms of stock price history. 9. 9 Live Example 1 Shares Statistics: We could get into some shear statistics and talking about some of the activity or in terms of shares being traded on the exchange about, regarding that company. So over here, you can see that we have some statistics we can actually cover to get some insight from what's happening in terms of volume and who's holding the stock for that specific company and so on. So over years started with average volume. Now we have to average volumes, right? One is for the last three months. So remember this is average. So over the last three months, every single trading date, this is the average volume of shares being traded, write something for ten days. So this is the 10-day average volume, this is the three month. So just remember the note the difference between the timeframes right? Now over the last three months, the average volume of shares being traded was 2.5. 8 million shares. This number is not it's not a dollar amount disorder percentage. It's the number of shares being traded on the exchange. And it doesn't tell you whether people who, how many bars, how many sold. It doesn't give me that. It just tells you, on average how many shares were traded on the exchange over the last three months. So over here the numbers 2.58 million for tattooed, tough and the average volume for the ten day was 3.17 million. Now, immediately, these numbers might not really mean anything to you, right? But let's think about it. So the average over the three month every time you see the average, like that's shorter than three Monday in this case, ten days is a smaller timeframe than three months. So whenever you see the average, even, even 30 days, right? If if you if you go up here and if you go to the summary tab, you'll be able to see the average volume, right? This is, this is one day's volumes. So let's say today, this is the volume for today which was 2.2.95 million shares. And this is the average. This average is actually for the last 30 days, not the last three months, but the last 30 days. Right? But what I'm trying to say is that whatever you see, the shorter timeframe is actually higher than the longer timeframe. It means that there's some sort of activity going on. There's something that's actually making people notice and for people to actually either buy this stock or sell the stock, right? Possibly a catalyst, possibly a news, or some sort, right? So let's go back here and click on the Statistics tab and we go to the Share Statistics section here. So you can see here that the average volume for the three month was 2.58. But for the ten days, which is a shorter time, is actually 3.17. So this is actually telling us it recently there's been some sort of over the, above the normal activity in terms of shares being traded. Right? And that again, that could be possibly due to a news, right? Because typically you see the ten to the tenth, the volume shares being traded should be less than the average if, if it's a normal, regular day, no news, nothing bad, nothing good is happening. Typically the average of the shorter time frame, in this case ten day is less than the three, the longer timeframe, which is three month when comparing these two numbers. In this case it's the reverse means that recently there's been some unusual high activity, right? In terms of the stock being traded, whether it's being bought or sold, right? So it means there's some activity trading activity going on with that to CEF, right? Let's take a look at the beyond me here. And it's pretty much the same. So the average three month volume for the shares being created was 4.06 million. And the average volume for the last ten days to being traded on the exchange is 6.3 million. Now, again, you can see that same story goes with Beyond Meat. So the average of the ten day, the number of shares for the average ten day in terms of volume being traded is higher than the last three months. So again, some sort of recent high, high volume activity going on in terms of shares being traded. Now again, you can't know if people are buying the stock more or if the people are actually selling this dogma, you can't draw that inside from this. You eat just tells you that recently there's been some unusual high level activity in terms of trading. Next, I would like to cover the concept of shares outstanding and float. But before that, it's important to understand that most companies that go public or decide to go public, they do so because they need capital. They need money. And mostly they need money because they want to expand and grow their business, right? And this is one of the main reasons why companies decide to go public now. And the way they get that money is they actually issue shares, right? The company could also try without going public, they could try to get some sort of private loan from a bank or something. But it really depends on how much of a loan, how big of a loan they can get, right? Maybe they can't get that big of a loan compared to what they need. But if they went public, then they can actually get that much in terms of capital loan from the shareholders, right? And the way that works is that when the company goes public, they actually issue shares, right? They issue shares out there on the exchange. Now investors go and buy those shares and purchase those shares. And then the company takes the money from the investors who have purchased those shares and uses that money as the capital, right? It takes that money, puts it back into the business to try to innovate and grow and expand whatever facilities, manufacturing buildings, hire more employees, increase, research and development, sales, marketing and so on, right? So that's, that's how companies get money. They go public by issuing shares. Investors buy those things they use, they buy those shares, they invest. They take the investors money at the actually. Use it as a capital to expand the business right? Now, shares outstanding. What this means is simply how much shares the company has issued overall. So this includes the shares that are held by regular investors, the shares that are held by institutional like big banks and things like that, or maybe even fun providers like mutual funds providers, ETF providers and so on. And also it also includes the restricted shares are shares that say you and I can't buy. Those are restricted shares, typically referred to shares that are held by insiders. So for example, the shares that are held by employees and management, C0 and C0 and C2 of the company, right? So in insiders and employees own those restricted shares, right? So the important thing to understand is this outstanding represents all of that. So the overall amount of shares the company has issued out there. What float means is the number of shares that can be purchased as of right now. Now remember these two numbers. They're not, they're not dollar amount, they're not percentage there and number in terms of the number of shares. So for example here, shares outstanding for the tattoo chief company on the left is 71.55 million shares. So this is how much, how many shares the company has issued overall to get that capital by having people buy those shares and using their money to expand the business, right? So overall, the put out 71 ohm. Overall, the company itself as an entity, has issued 71.55 million shares. Now for float, it's 19.84 million. So notice these two numbers are not the same. This number is smaller than this number rate. And there's a big difference between the two. If you subtract that number from this number, you can see that the delta between the two differences, huge rate and that difference or the shares we can't purchase as investors. If you look at the flows, this is the number of shares. If you wanted to buy shares of this company, this is how many shares you could potentially buy. So 19.84 million shares out there to purchase for investors. As of right now, again, this number changes as more people buy the stock. But again, these numbers could also change the future as the company decides to raise more money. So then they would actually put out more shares, right? They would offer more shares out there. Or if the company is making a lot of money and bringing in a lot of cashflow. They could actually use some of the cash to buy back the shares. Because when you buy back shares, you are really decreasing this number because now the more company itself owns more of its own shares. And you're also helping decrease the dilution amongst shareholders, right? Because the more shares you put out there, you're diluting existing investors, meaning the motions that are out there, the value of the existing shares by those that are held by those investors actually goes down. If there's less shares out there for people to purchase them, those existing shares become more valuable. The shares that are held by people or become more valuable because now there's less out there for people to purchase if they wanted to write. So it's important to understand that. And this is really the difference between the two. So if you wanted to purchase however many shares we wanted for this company, we could only do so with this number. So as of right now, we could only buy 19.84 million shares, right? So this is really important to understand. So let's head over to beyond me and you can see that beyond meat actually shares outstanding of 62.606 million. So you can see that this company has decided to issue less shares when comparing two tattoo chef, right? This is 71, this is 62, right? And if you look at the float, there's actually 43 million. So as of right now, if you want it to, let's say you wanted to buy all of the shares available for this company. You could buy more shares for Beyond Meat as opposed to tattoo chuffed because you can only by about 20 million shares. For that to shift over here, you can buy 43 million shares. So these are some of the things too actually note and tried to understand because you can't again, you can't immediately draw conclusion in terms of the valuation of the company. But you can see that, for example, beyond meat has issued less shares out there to the general public compared to tattooed chef. There next to statistics are, I think by far the, one of the more, most important statistics that we need to pay attention to in this section overall. So the held by insiders and held by institutions. So this again kinda self-explanatory, but held by, this is again the number in terms of percentage. So its saying the percentage of shares for this company data held by insiders. And this tells us the percentage of shares that are held by institutions. So for example, big banks or foreign providers, mutual fund, ETF and so on. So it's important to understand these things because it could tell you some really, really important things. When it comes to, you could draw some insight from this to help you with your valuation. I will cover that in one moment. So over here you can see down the left hand side for the tattoo Chef. We can see that held by insiders, this number is 61.5%. So I can tell you right off the bat, this number is really high. And if you look at the, so 61.5% of shares are owned by insiders. So employees and the founder and the co-founder and so on, right? And then held by institutions, it's only 8.14%. Now, one thing I want to let you know is that this number does kind of makes sense because tattoo chef is fairly a new company. They fairly went public recently. I mean, as a time again is relative as a time of the recording of this video. But also compared to Beyond Meet the beyond, beyond meat company went public way before that to Jeff. So it's important to understand that. And one thing to note is that when a company first goes public, large institutions such as banks or brokerages, they can't immediately jump in because that companies knew and they haven't. You need to let some time pass so that the company can actually prove themselves, right? You wanna see the company's revenue grow. You wanna see their losses go down over time. You want to see them become more profitable, and so on, right? You want to see them increasing their cashflow, that you wanna see them increasing their asset. So banks can't take that risk when a company first goes public bank can just immediately jump into that, right? Because I'm not enough time has passed by for them to see earnings from these companies. Maybe they want to wait about a year to see four quarters worth of data for the worth of revenue worth of loss, sort of to assess whether to invest in this company or not. And for one reason, because when institutions by the, by in really large amounts, they are not. For example, as retail investors, we might just by very small amounts, maybe. I don't know. Just as an example, 20 shares, 50 shares, a 100 years or 1000 shares. But when institutions invest day by day by, by millions, right there by like, either in terms of shares, like they buy hundreds of thousands of shares or millions dollars, millions of dollars worth of shares. So they make big, big purchases, right? So it's important to understand that. And for them, they have, they can't be associated with that much of risk. So that's why this company is new. It does make sense that a lot of these shares that are held currently by insiders and not much institutional shares are being held. And over time this should change because insiders will slowly sell, sell their shares because they wanna get some profit to write. Insiders typically get shares for much lower price before the company goes public. And when it does go public, well, they wanna sell because they want to lock in some profit. And maybe some people even want to retire. So like they sell their shares so that they can get that money and just quit their jobs and live happily ever after, right? So you will see that this thing will get rotated as the company progresses through its lifecycle, right? And if it's a healthy company than this money rotation will happen, this shared rotation will happen. More of these shares will be sold and by insiders. So this number will go lower and institutions will start to buy more shares with this number will increase, right? And that's exactly the case. You see with that to Jeff, let's head over to Beyond Meat here. You can see that they held by insiders is actually the opposite. Is held by insiders is 12.27%, but held by institutions. Again, this is referring to the number of shares in terms of percentage and held by institutions is 44.21%. And to me this makes perfect sense because Beyond Meat has gone IPO before. To Jeff companies. So there they are. They have been in the industry more. They had been trading longer than tattooed chef on the exchange. The company has released a lot more earnings reports over the last several quarters. So it does make sense that this company is, you could say it's a more established and it's more of a blue-chip when compared to tattoo chief because it's been in the industry longer. It's been IPO longer, and it's been public for lager. So that now that risk goes down, that means institutions are more comfortable investing in this company, knowing what sort of risks are involved, what sort of potential gains might, might lie ahead and so on, right? So this is exactly what I was talking about. Overtime, the held by insiders will go down and held by institutions will go up. As the company becomes more stable, making more profit and becoming more of a blue-chip compared to, say, for example, a start-up, right? And this is a perfect representation of that here when comparing the two company. Now, one thing to note is that when we're looking at beyond me, so this company is actually has stabilized, right? And we'll look at other companies as well. But this number is still not high, like I've seen companies with 9897% shares held by institutions. So this company has a long way to go, but competitive beyond me, this already pretty, pretty much up there, right? It's pretty high up there. Helped by institutions for this company is really, really low. What this tells us is that potentially when that rotation happens, this stock price for this company has a lot more room to run or grow, I should say, because this number is really low. So let's say if this number, if this number wanted to, was to go up. Remember, they don't necessarily the institutions, they don't necessarily have to buy from insiders, right? Keep that in mind. Remember this float numbered, all these shares are available for purchase, right? So this number could still remain the same and this number could go up because these guys don't have to sell for these guys to buy. These guys could just buy from the float, which is 19, almost 20 million shares available for grabs, right? So they could still go ahead and buy if they feel like the risk has been lowered or has been reduced over time, right? So keep in mind in terms of valuation when comparing this number to this number here, right? 8.144. This one tells me that this has a lot more room to grow, right? So potentially, when this company proves itself, that says, hey, this is a good company. They're making a lot of revenue. They're making profits, and they're continuously innovating than institutions might jump in and say, hey, this is a good company. We need to get in early, right? And when they start buying the stock and when they start buying more shares, well, that will bring up this number, but guess what? That will bring up this price as well, right? It will slowly, the more shares you, they buy. Or the moisture's anyone would buy will bring up the stock price, right? But it's because they're buying in really high quantity. It will actually bring this stock price higher, a lot faster. So that's something to keep in mind, right? So this tells me that the tattoo chef company potentially has more room to grow at least over the short term. So when the institution's catch on and decide that this is a lower risk company. Now, we've seen enough, we have enough data to decide that this is low enough company and we wanna invest more money as opposed to what we already have. Then this data will start buying shares and they will automatically price. They drive the price up. Now, it could be, it could be said the same thing for this, but obviously this is already a 44%, so it's harder, it gets harder and harder for this to go up. But because this is such a low number is easier to price, drive the price up by buying more shares in high quantities for tattoo Jav company. So I hope that really make sense, but it does sort of indirectly tied into valuation if you looking at future price growth and projections. Alright, so the last most important statistic I want to cover in the shirts Statistics section, it's called short interest, also known as short percentage of float. Now before getting into this, I'd like to explain the terminology and the concept of long and short. So long means that if a, if an investor buys the stock for a given company today, they're hoping that the stock price goes up in the long term and in the future. So they are betting that the company will actually do well. So then they're actually buying the stock right now at today's price. Anticipation that sometime in the future the stock price will go up. And then sometime in the future they can actually sell this stock and whatever they sell ads. At the difference between the point they buy and the point a cell is becomes their profit. So that's the capital appreciation or growth. So that's, that's the definition of long investors betting on the company doing well and the stock price going higher and gaining on top of that. But the concept of short is exactly the opposite. So the concept of short is when an investor actually has a negative sentiment in the company. So they thinking that the company is not doing well and the stock price will, for that company will reflect that long-term and l actually go down or perhaps short-term it could, the company can have a really bad news and the stock price could suddenly drop, which is normal. And this is where investors, when you hear the word selling short or starting a short position, this is where investors are actually betting against this stock. Now how short works is sort of the opposite of long. So. What investors do is they actually sell the stock at the current price. And then as the stock price is going down sometime in the future, they actually buy this stock back. Now you might ask yourself, how can someone actually sell the stock? And they don't really have a position in the stock in the first place. So if they never actually bought this stock, how can they sell it? Where this is how this is where the brokerages come in. So when you're actually selling a stock short, you're borrowing shares from the brokerage so that you can actually sell. And as the price goes down, you're hoping to buy back those shares, meaning you return those shares back to the brokerage at a lower price at the difference at which you bought and the difference that you sold, that difference, that delta becomes your capitals. So again, you buy at the current price, or sorry, you sell at the current price, the stock goes lower in the future, and then you buy back at that lower point and the difference is your capital appreciation and gain. Now, the concept of short selling is a bit of an advanced topic and outside of the scope of this course. But I just wanted to introduce the concept so that we can go ahead and talk about short interests. Now that we know what short-selling is, we can go ahead and talk about short interests. Short interest is a sentiment or representation of sentiment of Wall Street or stock market for a given specific company. And short interests is typically presented as a number. That's, that is actually presented as a percentage format. Now, the higher the percentage of short interests and the wars, the market's perception of that company is so having a really high short interests is a bad sign because that shows us a lot of shares. A lot of float for that company has actually been shorted by retail or institutional investors. Now. So if the company has a really high short interests, that's actually a really bad sign. So for example, companies that are doing really bad financially or they're on the verge of bankruptcy, those type of companies typically have a very high short interests. And the lower the short interests, the better the market sentiment of that company. So blue-chip companies such as the biggest companies in the S&P 500, such as Apple, Amazon, Facebook, Google. Those companies have very, very low short interests because they have been around for a long time. They're doing really, really well financially. They're innovating, they're growing. And almost nobody wants to bet against them because the chances of them doing bad in the future is very, very low. Dale, just continue to do well and succeed and just do better and better and increase their revenue on growth. So you typically, for companies like the other blue-chip companies, you don't see a very high show. Short interests. So the lower the short interest that better because it tells you that the stock market or Wall Street actually thinks that this company is doing well, the higher the short interests. It means that the worst this sentiment is from Wall Street for that company. But as mentioned earlier, short interest is usually represented in terms of percentage. And as investors, we want to be looking at companies that have lower short-term interests because the higher the wars the company is doing and the worst people are actually betting against that because short interests typically represents the percentage represents that the, how much the other investors have shorted the stock. So in different platforms, you might see short interest as different things or described differently in Yahoo Finance is platform in the statistics tab, you'll see this described as short percentage of float. So when you're looking for short interests for a stock, this is where you would come. Now on the left-hand side, we have the tattoo CEF company and for some reason, the Yahoo Finance has not recorded as short interests for this company in this section, so it's showing as not applicable. However, on the right-hand side, we can see that there is a number recorded for Beyond Meat. And a short interests for Beyond Meat is 24.38%. Now, before getting into the numbers, one thing I'd like to, I'd like to mention here is that I'm not quite sure why Yahoo Finance doesn't have this number recorded, because almost every company has a short interests. It's just a matter of how much, how big or how little. And over here, just because we can't see it in Yao finance, it doesn't mean that the company doesn't have short interests. So one thing I've done is on the top here I've opened the seeking alpha website and I've typed in the tattoo HF ticker symbol in here. And if we actually maximize this window, you can see that you can find this short interest over here. And as you, as you hover over it, it also shows you a description of what short interests means. But really we covered that already. So we're looking for then numbers. So you can see that the tattooed chef here, the company has a short interests of thirty-six point six, six percent. So let's just say 37%. Now, this number is actually quite high because later on in this course we're going to cover some examples of blue-chip companies. And you'll see that those numbers are really, really low. So typically anything over 30% is considered. It's already considered bad. And anything above 50% is considered terrible. So you want to try, you want to keep an eye on these numbers. So right now here, tattoo chef has a really high number of short interests. Now it doesn't mean that the company will go bankrupt or the company will do bad in the near future is just that. At the moment there is a lot of people who have shorted the stock. And in the short-term the stock by actually the price might go down. So the only thing to note here is that the short interest for this company is 37, which is kinda on the high side right? Now if we go back to Yahoo Finance, you can see that the short interest for beyond me is actually 2.24%.38. So remember the left-hand side we attached to chefs with a short interests for this was actually thirty-seven percent approximately, and for beyond me is 24.3%. So this tells us that the short interests for Beyond Meat is actually lower than tattoo chef. And this tells us that the sentiment of the overall market is better on this company Beyond Meat, because the short percentage is actually lower. So now this doesn't mean that one thing to note is that even for beyond meet this, 24% is actually on the high side as well. So it's not like Beyond Meat is doing really, really well in this category, is just doing better in comparison to tattoo chef because it's too chef is 37, this is 24. So 24 is still on the high side because later on in this course, we're going to cover an example of two blue-chip companies. And you'll see how low the short interest on somewhat Those are. But the important thing to keep in mind is that the short interests is a sentiment, is the market sentiment for a given company. And the numbers a, presented as a percentage. And the higher the percentage, the worst it is in terms of looking at that company. So it's actually a bad sign and a red flag. So we want to stay away as someone who's valuing a company or as someone who's analyzing a company, we want to stay away from companies that have very, very high short interests. And again, typically anything above 30 is bad. Anything above 50% is terrible. So in this case this is below 30, which is fine, not the greatest, but it's okay. And afford CTCF is 37%, which is a bad sign. But it doesn't really mean the company is going to go bankrupt, or it doesn't mean that the stock price won't go up in the near future. Now, short interests doesn't necessarily directly tie into the valuation of the company. However, one way of looking at it is that if a company has a really, really high short interests, it might mean that at least for the near future, that this stock price might slowly go down. Now, it doesn't necessarily mean l do that is just a, It's just an educated guess because a high short interest means that a lot of institutional investors or retail investors have shorted the stock. And as if the stock price will go down, other investors will see that. And we'll probably jump on the ship and short the stock even more so the price will continue going down and sort of like a domino effect. And this is why we want to stay away from companies that have really, really high short interests. But it doesn't mean in the long-term debt stock price won't go up. There's a really high chance that this dye stock price can go higher and higher. And even with a really high, a short interests, Sometimes you see the stock price going up if the company presents good numbers and good earnings, just some things to keep in mind. A really high short interests might indicate that the stock price is going down or will go down or will continue to go down if it's already started going down. So those are some things to keep in mind. But in our case, for this example, we'll definitely have to favorite beyond me because this short percentage of float, or also known as short interest, is definitely lower when comparing to the company beyond tattooed chef. 10. 10 Live Example 1 Dividends and Splits: The last section in the statistics tab of Yahoo Finance website is called dividends and splits. So before getting into the numbers, let's actually walk through what dividends and splits are. Go ahead and start by talking about dividends and what dividends are. Dividends are simply a cash payout from the company to the investors or people who actually hold shares of the company. So what, what companies do is when they make the revenue from sales, when they have revenue coming in, they use that revenue to grow the business. And also they have different type of expenses and somewhat that makes it into earnings and also cash that the company is selling on. So sometimes management decides to take part of that cash and actually make a payment to the shareholders to reward them and thank them for investing in the company. So dividends or simply just the cash payout to the shareholders. So just like having a regular savings account and having money in there and having that money accumulate interest overtime, dividend is pretty much the same concept. So if you're invested in a company that pays a dividend, then if you're holding shares, you will get paid some dividend or you'll get paid some cash on the shares you hold. Now the amount of dividend depends on two things. One is, what is the percentage or how much the company decides to pay out in terms of dollar amount or in terms of percentage to the shareholders. And number two is how many shares of the company you hold. Because the more shares you hold, the more dividends you will get. And just to note something, something on dividends is that not all companies actually pay out dividends. Typically growth companies don't pay out dividends. Companies, such as blue-chip companies that are pretty much massive in terms of market gap and they have steady revenue and steady cash flow. Those companies might choose to pay dividends to their shareholders. But just something to note is that typically growth companies don't pay out dividends to their shareholders because they just want to, you want to use as much of that cash to grow the business so that one day they can actually go in and become pretty big and become a blue-chip company. Now let's talk about splits and what Splits? Splits though, is also a very simple concept to grasp. And what it is is that sometimes the company's stock price has a huge runup over multiple span of multiple months or years. Because they're having good revenue, they're growing, and the stock price going up is actually justified. And but at certain point it gets, it gets to a price where it's really hard for investors to actually invest, for example, accompany When they go IPO or when they go public, the share prices could range anywhere from, say $10 to $200. This is just an example rate, and it is the lower the price, the more shares investors can buy for the same amount of money they would invest in. So the cheaper the share price, the more shares they can actually buy initially. But as time goes by, if the company performs well, the stock price will go up, which is, the company's performance is actually should be sort of proportional to the stock price gain and to at certain point, it gets to a price where the stock price is so high that for regular investors, they're no longer able to buy shares. And here's an example. So over here on the right-hand side, I've loaded up the company Amazon.com, and its ticker symbol for this is a, m, Z, N. And you can see that if we go ahead and I'm going to bring the summary here and let's take a look at let's go ahead and take a look at the five-year chart here. So you can see that right now around 2016. You can see that on the right-hand side here you'll see my cursor around the stock was around 760708740. Let's just say this stock price was around $800 to round things up and keep things simple. So around this area for the longest time it was sort of flat but steadily going up rate. But around 20162016, it was around seven, let's say 800. Right. And then you can see that over time from 2016 to 2020, it is stock slowly gained momentum. Managers going higher and higher and higher, right? So now look at the price as of today. So this is the price as of the time of this recording. This could change at any time, but you can see that the stock price is over $3 thousand per share. So when the stock price was around 800 is easier. I'm in 800 still pretty high number per share, but not as high as $3,292 rate. So it was easier for investors to invest in the stock or invest in the company by buying the stock at $800 per share. Now it's over $3 thousand, which is a huge difference. And now people who wanted to invest in the company are no longer able to, because maybe that person has $3 thousand in total. And now they can't event to invest and they wanna invest in the company. And now they can't even do that because one share of the company is over $3 thousand. So for example, if I had 3 thousand and wanted to invest in Amazon, I can't write unless you have a brokerage that allows you to buy partial or fractional shares. That's a different story. You could go ahead and do that. But right now, I just buying whole number amounts for the shares. The number of shares that you can't get one if you only have $3 thousand, right? If you have $3,500, you can just buy one share. But one share is not much, right? It's not even worth considering to invest in the company. So. This is what, this is where the concept of slit comes in. So what, what happens when a company is split is that they decide to split the price so that the price goes down so that other investors with less money can actually jump in and invest in the company if they wish to do so, right? So over here, let's just keep things simple. And let's say the stock price is $3 thousand per share. Now, Amazon, what Amazon management might do or decide to do, It's for the company to have a ten to one split. And this is just an example number. I have no idea what the management is going to do. This is purely based on their decision. Some companies do a two-to-one, some companies do four to 15 to 110 to one. It really depends on the company and we won't know until the company announces it to the shareholders. So 4x to the general public out there. So let's say this is 3 thousand and the company decides to do a ten to one split. What's going to happen is that now this stock price will drop to, because we're doing a ten to one and we are saying that this is $3 thousand. Imagine this is rounded down to $3 thousand at ten to one, the price down to $300 per share. Now, $300 a share is way less than $3 thousand a share. So now investors can actually jump in and buy shares. Whether the existing investors, they can buy more shares, whether they're new investors and they currently have no position, they can actually start a position and buy shares at $300. So now if you actually had 3.What $1000 to invest, you can then buy ten shares instead of one share. So it is worth investing if you're actually getting tensors one share, not so much, right? So that's what we're the split. This is the concept of a split. But now, what happens to the people who actually own shares of the company from previously? And now the share price has reached $3 thousand. What's going to happen after the split is any shareholder before the split that was holding shares, they will get ten times the amount of shares. So what's going to happen is the stock price will come down from 3 thousand to 300 because the company needs to be fair to those people that were already invested in the company from way back and they already were holding shares and put their money in. If the stock price drops to 300, well, they're going to lose a lot of money because they might have bought in at 400 a share or 600 the share or 100 a share, right? And if the price drops it 300, well that's not fair to the existing shareholders because now new investors can bind at a cheaper price than the previous investors. So what they're going to do, what the company is going to do is they're going to give them ten times the amount of shares that they currently hold. That way they're net total doesn't actually change. So if they had, let's say, if they had $10 thousand in invested in Amazon before this split, after the split, del, del, ONE more shares, but each share is worth less. But at the end, when you do the math, it still adds up to $10 thousand. So they don't lose money, they don't gain money. Everything stays the same. This is just for the company does this so that they're fair to the existing shareholders. And it really, and nothing really changes for the existing shareholders. It's just that the net total for them remains exactly the same before and after the split. And then when the price comes down, this opens new doors to the new investors who can actually go ahead and invest in the company at a cheaper price. So this is what split means. Now one thing I would like to bring to your attention is that dividends and splits are not necessarily a good factor or good measure or metric to consider when you're valuing companies side-by-side or when you're trying to determine if a company is undervalued or overvalued. Because there could, there's so many scenarios out there that you could have a company that's really, really overvalued and they do pay dividends. Or you could have companies that are very, very undervalued and they pay dividends. So this is not a good measure compared to some of the other things we looked at, such as financials and valuation measures, those are better, better metric to use when you're comparing a valuation of a company with another company or just the company by itself. So dividends is which don't really play a huge role in valuation. But I would like to mention that because we are covering them in this course, it will be good to go through some examples with you so that you can actually learn about those as well in the same course. So we'll go ahead and cover them. But as you can see here on the left-hand side, again, we are looking at the company tattoo chief and then the right-hand side, we're looking at the company. Beyond Meat. You can see that neither of the company are paying dividends. Because you can see that all of the metrics or statistics for dividends are all NA or not applicable. And so the, None of, neither of the company is actually paid dividends. So there's not much we can do in this section. And you can also see that there was no split off for their company tied to Chef, and there was no split for the company Beyond Meat. And as I mentioned, these are both relatively new companies compared to some of the other companies that have been in the market for decades. And it does make sense that they're not paying dividends because there's at the early stages of their development and lifecycle. So they have a long way to go to actually grow into a massive company. And it does make sense that they haven't had any splits because they, I mean, you can see their share prices here, right? Currently as the time of this recording, that HF is trading at $24.24 feet, $24.54 per share, which is pretty reasonable and investors can manage to buy this. And beyond meat is actually trading at 148.70, which is again not too bad, right? But if this number gets into thousands, then that's where the company might actually decide to have a split. But as of right now, neither of the companies actually have any, didn't none, neither of the companies pay dividends or neither of the companies have done any split. So we have no data or metric to go off. So for this, for this example, we're going to skip them. But in the next example, compared to companies that have both, that pay both dividends and splits. So that we can actually go through the numbers and talk about what they mean. 11. 11 Live Example 2 Valuations: Section for our second example, we are going to cover two big giant tech companies and compare their valuations side-by-side. On the left-hand side here we have Apple Inc. ticker symbol AAPL, and on the right-hand side we have Facebook, Inc. ticker symbol, Facebook. And I'm pretty sure everyone at this point is familiar with these two tech companies. On the left-hand side, we have Apple and Apple makes iPhones, they make iPads, they make mac books. They have streaming services such as Apple Music, Apple TV. They have hardware such as Apple Watch and also ear bud and airports and so on. And on the right-hand side, we have Facebook. Facebook is mainly in the social media sector. They are as social media platform. They have revenue in the ad space, so they make a lot of money from selling ads. And also they own a lot of other social media platforms such as the WhatsApp, Messenger, Instagram, and so on. And they're also heavily invested in the virtual reality through their products Oculus. Or in this section, we're going to compare the two companies side by side so that we can figure out which companies more overvalued and which company is actually undervalued. And if you're able to do that, then as investors or anybody who wants to invest money in either of the company, you'll be able to make an educated decision where to actually invest your money because the more undervalue their company is, it means that there's more growth and potential gain in the future. Let's go ahead and get started here. So we'll start by looking at the valuation measures first. So just remember on the left-hand side we have apple and on the right-hand side we have Facebook. So we'll start by looking at the market cap here. And it looks like approximately Apple has a market cap of 2.34 trillion, which is a pretty big number by the way, Apple is one of the largest companies in the world. And you can see that right here. No, there are in many companies that are in the $1 trillion category when it comes to market cap. And Apple is by far one of the biggest companies in the world. And over here you can see that Facebook has its trading under $1 trillion market cap. So Facebook has a market cap of 781.86 billion. And that tells us that overall, Facebook is a smaller company than apples. So that's just something to keep in mind, doesn't really tell us much. It just tells us that Apple is a much bigger company than Facebook by just looking at the market cap here. Now looking at Apple on the left-hand side here, the market gap is 2.34 trillion and enterprise value is 2.4. So looking at these two numbers, it tells us that apple, It's just slightly under value, just, just very slightly. You'd not by much. So 2.34 versus 2.4, and these two numbers are pretty close. So we can treat Apple as trading at fair value at the moment, if you're looking at the enterprise value and the market cap, just very, very slightly undervalued, but they're so close that we can call these two numbers is same. And on the right-hand side we can look at that, look at Facebook and say that the market cap is 781, but the enterprise value 737. So just looking at these numbers again, these numbers are in too far apart, but it tells us that Facebook is slightly. Overvalued when you're comparing the market cap to the enterprise value here, let's take a look at the PE ratios. You can see on the left-hand side, the apple has a trailing PE of 42.40. And on the right-hand side, Facebook has a trailing PE of 31.27. So this tells us that Apple actually has a higher P. So it's, it is slightly overvalued and trading added at more of a premium compared to Facebook. And trailing PE is for the last 12 months with trailing 12 months. So for the past 12 months, Facebook has actually been more undervalued compared to Apple, because Apple as a, it has a trailing P of 42 and Facebook has a trailing PE of 31. So in this scenario, I would say that Facebook is more undervalued because of this PE ratio. And if we're looking at the forward p, So this is the projected p0 into next 12 upcoming months. You can see that Apple has a forward PE of 31.82. So first of all, this is good because the last 12 months it was 42, and for the next 12 months is projected to come down to 31. So this is actually good scientists see on Apple's perspective, or from investors who are actually looking from the outside to Apple and determining the value. So definitely looking at the P going down, that's a good sign. And you can compare the apples of forward PE of 31 to Facebook's forward P of 26. So this tells us that we are getting a much better deal with Facebook because the P for the next 12 months is actually 26, which is lower than 31. So looking at the PE ratios here, we can actually sort of draw a conclusion that Facebook is more undervalued and better investment if you were to actually choose between these two companies. At the moment. It tells us, look, the PE ratio tells us that it is more undervalued and it could potentially be a better investment for us as a choice. Now if you look at the PEG ratio for Apple for the 5-years expected, we can see that that number is 2.54, which is good, and it's not that high. But if you look at the PEG ratio for Facebook is actually 1.72. And if you remember, a PEG ratio is looking at the growth, and these two companies are considered growth companies. Although Apple is such a massive company now at the over 2 trillion market gap, that they can't grow their revenue that quickly, although they have been, they have a healthy revenue growth every year so far. So we'll have to see what happens in the future. But as the company becomes bigger and bigger, it just gets harder and harder for them to grow revenue because then it becomes harder for them to innovate. But that just means that the company becomes a blue-chip company, very stable and they'll just have that steady revenue stream. So not a bad thing. It just means that they can't grow revenue as fast as some of the companies that are smaller in size. So over here you can see that the PEG ratio is 2.54. And if you remember, the lower the PEG ratio, the better. And over here looking at Facebook, we actually have a PEG ratio of 1.72, which is smaller than apples PEG ratios. So again, looking at the PEG ratios, I would say that this is showing us signs that Facebook is actually more on their valued compared to Apple. And now, if you look at the price to sales ratio here, this is the price to revenue ratio, price to sales for the last 12 month. And you can see that Apple has a PS ratio of 8.52 and Facebook has a PS ratio of 9.90. This tells us that Apple is actually trading at a slightly more discount compared to Facebook, not that much higher. So one is close to nine, the other one is close to ten. So the two numbers are very, very, they are slightly close to each other. So I wouldn't there both good numbers. This is ten, this is 8.5. They're both good numbers for growth companies. They are fairly low. And I would say this is almost the same. I would treat the price to sales ratio of both of them the same. But then if we move to the price-to-book ratio, apple, you can see that that one is 36. And the price to book ratio of Facebook is actually 6.65. So this is where we see a huge difference. So we didn't see a huge difference in price to sales. So we can just ignore that both companies have healthy price to sales ratios of 8.59.9. But over here, the price to book ratio, there's a major difference. So Facebook is sitting as 6.65, which is a lot less than apples, 36.103. And again, if you remember from previous lectures, they lower the price to book ratio the better. So over here, Facebook definitely has Apple dominated in terms of being undervalued for the looking at the price-to-book ratio. So again, this is another indication that Facebook is actually more of an undervalued stock or a company when compared to Apple, spent a whole lot of time looking at these two ratios, but let's quickly cover them. And the first one is enterprise value to revenue. And you can see that for Apple, it's sitting at 8.734. Facebook is 9.3 for. Now, if you look at this, this is the comparison. This ratio is a comparison of company's enterprise value, which can be found up here to its revenue or to its sales. And you can see that the equation, just by looking at the equation, its enterprise value divided by revenue. So the bigger the revenue or the bigger the sales number is, the result of that equation is actually going to be a smaller number. And that's exactly what you want to see. You want to see a company's revenue number be very, very big or as big as possible because it means that the company is making a lot of money. So then if the revenue is really big, the result of this equation is going to be as small or very small number. So that's what we do. We want to see, we want to see a small number for this ratio. And you can see here for Apple is 8.734, Facebook is 9.34. And just looking at those two numbers, it is showing that Facebook is slyly trading at a premium, which means it's slightly overvalued, but not by much. So I wouldn't say that this is a deal breaker because looking at the two companies here, this is 8.73, which is very close to nine, and this is 9.34, which is slightly higher than the numbers are very, very close. And they are healthy numbers to see for this ratio. So I would say they're both good numbers. And yes, Apple is a little bit more undervalued in this case, but they're very, very close. If you're looking at the next one, which is enterprise value, compare to EBIDTA. And for Apple this number is, let's say round that to 31. And for Facebook it's actually 24. So this one is, there's a bit of a more of a difference between the two. Because from the enterprise value to revenue, the difference is not even a one. If you subtract the two numbers, it's not even one. Over here, we can see that this is 31 and this is 24. So this difference is slightly more noticeable between the two. And if you remember, eta is simply earnings before all these expenses. And again, the same idea goes for this ratios. So because you are dividing enterprise value by earnings, and if the earnings is a high number, well then this number is going to be a lower number because in the equation, you are dividing this number by this number. And if this number in the bottom is actually bigger or higher, well then the result of the equation is going to be a smaller number. So looking at this, it tells us that Facebook has actually the smaller number between the two. So again, this tells us that Facebook is more of an advantage here in terms of being undervalue that Apple is actually trading more at the premium when comparing these two ratios. 12. 12 Live Example 2 Financials: Let's go ahead and take a look at the financial highlights for the two companies here. And we can start by looking at the fiscal year, and this is actually a really good example. So if you look in the left hand side for Apple, this is what I was mentioning earlier in the course about the company. Not all companies have the same fiscal year. So most companies, yes, they do have December 31st as the fiscal year end. But you can see that here is a good example of not all companies are like that. So for example, for Apple, the fiscal year ends a December 26. So, but for Facebook, their fiscal year end is actually December 31st. So just something to keep in mind there, but there's not much numbers is just dates, so there's not much we can do with that. Now let's go ahead in the profitability section. And you can see that on the left-hand side, for profit margin, we have apple sitting at 20.91, so let's just say 21. And then we have Facebook sitting at 32. So Facebook, the profit margin, the percentage is higher and that's exactly what we want to see. We want to see this number to be as high as possible. The higher the better. And you can see that Facebook is actually sitting at 32 and Apple is sitting below Facebook at 21. So slightly noticeable number there, pretty much close to 10% difference. And this tells us that Facebook is actually providing a better value between the two because Facebook has a higher, much higher profit margin. And then if you're looking at the operating margin for the past 12 months, we're looking we're seeing apples sitting at 24.5, 1-5 percent, and we're looking at Facebook sitting at 30.08%. So again, Facebook has a better operating margin because we do want this number to be as high as possible. And when comparing the two, Facebook has Apple dominated because Facebook's number is higher than it apples. So looking at the profit margin and operating margin, Facebook has, has Apple bead in this section in terms of being profit more profitable, you'll look at the management effectiveness for both of these companies. And you can see that on the left-hand side, we have return of assets for the past 12 month for Apple sitting at 12.51%. And for Facebook, we're looking at that number sitting at 10.96%. So let's say 11.5%, 12. So both companies, the numbers are pretty close. Apple is slightly at an advantage here four, by being up by approximately, say, 1.5% higher. But the difference is not that noticeable. So I would say both companies are doing a pretty good job in terms of managing their assets to make money. And again, I wouldn't, I would say both of these numbers are good when comparing the two companies and they're both managing acids Well. So not much to say about that. But if you're looking at the return on equity, you can see that facebook is sitting at approximately 74%, but Facebook is actually sitting at 24%. Well, 23.8388, but I'm just rounding that up to 24 and I'm just rounding apples to 74. So. That difference is actually quite big and quite noticeable between the two companies. So Apple here is definitely has Facebook dominated. And I'm sure Apple investors or people who are actually holding Apple stock are very, very happy about this fact. And let's go through the income statement here. And you can see that for the revenue for the last 12 month for Apple was 274.524 billion. Facebook, that revenue was 78.98 billion. Now one thing to keep in mind is that all of the numbers in terms of revenue, sales, earnings, and such, It's definitely going to be lower for Facebook compared to Apple, because Apple is a much bigger company. Apple again is two over $2 trillion company, while Facebook is a $700.7, $100 billion company, right? So keep in mind, those numbers will be, will be lower. But that doesn't necessarily mean it's a bad thing. So the revenue for Apple is bigger than Facebook because Apple is a bigger company, so they make more money and they have a higher revenue. But as steady-state, steady stream of revenue coming in every quarter. And but one thing to note is that if you look at the quarterly revenue growth, this is year over year. So if you're sitting at Q4 of 2020, this revenue growth here, compared to Q4 of 2019, it was only 1% growth. And this is a really, really small number. I don't like this number at all. If I'm investing as a person into a company or as a investor into accompany. I do wanna see big revenue growth. I don't like to see a negative revenue growth, or I don't like to see very small positive revenue growth. And this is where actually Facebook has Apple beat. So you can see that the quarterly revenue growth year over year for Apple was 1%. But take a look at Facebook. It's actually 21.6%. And this is a huge number, right? It's, it's 20, it's exactly 21 times the Apple's revenue growth. So this is what I like to see. So in this case, I would favor from a financial or growth perspective or with favor Facebook in this exact moment in time compared to Apple, because again, 1% versus 21%. So this is a major massive difference when it comes to revenue growth, right? And then if we go down here, you can see that again, the gross profits was a 104 or a 105. If you round things up, for Facebook is 58. But these numbers will be smaller because again, Apple is a bigger company. So we do expect to see those things. And let's take a look at another important thing to take a look at in this section is actually quarterly earnings growth. So not revenue growth is revenue, this is earnings. So this is the company actually making profit on the revenue they bring in after expenses. So here you can see that the quarterly earnings growth year over year was actually negative. This is not good for Apple, is was a negative 7.4% You can see for Facebook, it's actually a positive number. And not only it's a positive number, it's a big positive number, it's 28.8%. So again, Facebook has Apple dominated in terms of quarterly revenue growth and also quarterly earnings growth. So again, in this situation, I would say Facebook would be a better choice by looking at the revenue growth here. Okay, now going through the balance sheet here, you can see that on the left-hand side we have apples total cash reported as the most recent quarter earnings as as 90.94 billion. So let's say 91 billion. So this means Apple is actually sitting at $91 billion worth of cash right now, which is great. And Facebook is actually sitting on 55.62 billion. So pretty large amount, but approximately, let's say half of Apple. So again, this is okay because Facebook is a smaller company than apple, so it is okay that they have less cash, but these are both healthy numbers to see for big companies. So the fact that they're sitting on a lot of cash, it's good. And however, I do want to bring your attention to something here. So on the left-hand side, we have apples total debt as of the most recent quarter reported at a 122 billion. Now this number is really big because if we hover over to the right-hand side for Facebook, Facebook has only a total debt of 11 billion. So massive, massive difference, huge difference. And this tells us that Facebook owes a lot less debt, and Apple was a lot more debt. So the bad thing about it is that the company has to pay debt, has to pay, eventually has to pay all of this debt over time. And this is a really, really big number, a 122 billion compared to 11 billions. So Facebook is definitely in favor in this situation because they owe a lot less money and a lot less money they have to pay back in the future. Apple is owing a lot of money here at 122 billion. The other thing I wanted to bring to your attention is this. So you can see that the apple is actually sitting at 91 billion, but a total debt of 122 billion. This tells us that if right now, as of right now in this moment in time, if Apple took all of their cash, they still wouldn't be able to pay this much. Because even if they did, if they took all of the 90, $91 billion worth of cash, they wouldn't be able to pay all of their debt because this number is less than this number. So even if they took the entire 90 billion and they paid, they try to spend all that money on debt repayment. They'll still have a lot more debt left to pay, right? But if you look at Facebook, Facebook is actually sitting at 55. Billion dollars worth of cash and they're dead is only 11. So if they wanted, they could just pay all of this off and still have a lot of cash left over. So this is definitely something to look out for and something to watch out for when you're trying to value companies have, when you're trying to invest in companies and you're looking for healthy financials over here. This is a bit of a concern that Apple has this much debt and not enough cash to actually pay off this debt. But we have the exact reverse situation in Facebook. Facebook has a lot of cash and they could use all of that cash to repay all of this dead instantly and still have a lot of cash leftover in the bank. So this is really important. Again, looking at this, I would favor Facebook over apple, and you can also see that in the current ratio. So this is another quick way of telling. This is the long way of looking at things but encourage you to actually go through this practice and exercise. But if you're just looking, if you just want to quickly take a look, you can see that the apples current ratio is sitting at 1.36. So previously we said anything above one is good, anything higher than two is great. You can see that its current ratio for Apple is 1.36. But take a look at Facebook. It's actually 5.5, which is higher than T2. So this is a much healthier number two, see, this tells us that when Facebook, when it comes to debt day have no issues. But you can see that Apple might have a bit of an issue when they're trying to pay this debt with this much cash, right? So this is something to keep in mind. But the current ratio gives you the picture pretty quickly here. When you are looking at the number 1.36 versus number for Facebook at 5.51. So again, in terms of balance sheet and debt and cash, right now from what we're seeing, we can conclude that Facebook is actually sitting at a better position then Apple. Alright, lastly, looking at the cashflow statement, we can see that Apple on the left-hand side, has an operating cash flow of $80 billion or $80.67 billion for the last 12 months. And this is a really good number to see is very high, it's positive, so that's exactly what we want to see. And they also have a good cache in terms of levered free cash flow for the past 12 months. And that's sitting at 60.39 billion. So both, both numbers are positive and both numbers are good. And then heading over to the right-hand side for Facebook and see that Facebook has an operating cash flow of 33.79 billion, which is good. And considering that they have much less dollar amount in terms of market cap compared to Apple. This number is actually good and they're looking at the levered free cash flow for the past 12 months sitting at $10.774 billion. So again, both numbers are positive to port numbers are really big and obviously we just wanna continue CCDs numbers increase as the companies become bigger and bigger. 13. 13 Live Example 2 Stock Price History: Alright, so let's quickly take a look at the trading information. And again, this is more of a technical than the fundamental. So it doesn't necessarily tie back into the valuation of the two companies. But here you can see that under the stock price history, we can see that the beta for Apple was 1.28 and the better for Facebook was 1.18. And if you remember, we said that beta, you can think of it as a measure of volatility compared to the general market such as the S and P 500 index for example. And look comparing the two numbers, it just tears again. Looking at this time window here, 5-years monthly, it tells us that Apple has been a more volatile in terms of the stock price movement compared to Facebook, because this is 1.18, so this is 18% volatile, this is 28%. So Apple has been more volatile compared to facebook when comparing these two companies to the general stock market. And over here you can see that the 52-week change for Apple was 80% and the 52 week change for Facebook was actually twenty-seven percent. Now, this is actually really interesting because we saw that the revenue growth for Apple was actually really, really low. If you remember, the revenue growth for Apple was, let's see if we can find it here. It was, the quarterly revenue growth was 1%, and for Facebook it was something like 20%, if I remember. So you can see that. But if you're looking at the stock price history here, you can see that the 52-week change, this dog has gained 80%, while Facebook has gained 27%. But the funny thing is that Apple is revenue growth was a lot less than Facebook. Facebook had a much higher revenue growth, but their stock price grew very little compared to Apple. And this exactly illustrates my point earlier where I was saying this stock markets accompanies price in the stock market doesn't always necessarily correlate with the company's fundamental. Sometimes things can get disconnected from reality, right? So in this case, I would actually want these two numbers to be positive because Facebook had a lot more revenue growth. So it makes sense for the Facebook's price to gain a lot of momentum by, by having attracted more investors into the stock, but in this case is exactly the opposite. Now, Apple is one of the top companies and they're very popular amongst the investor community. So it does make sense that people might favorite that over even though the revenue growth over Facebook, even though the revenue growth is a lot less than Facebook. So just wanted to illustrate this point that sometimes prices do get disconnected from fundamentals and reality based on things such as hype and other factors. So this is what this actually tells me. And we've covered these things. These are just technical and you can see that 50 day moving average here is 129200 is 116. This tells us that currently Facebook, sorry, Apple on the left-hand side is on a, currently on a steady op trend because the 52 day moving average is higher than the 200-day moving average. Looking at Facebook's over here. We're looking at the 50 day moving average being 270 and the 200-day moving average being two sixty two sixty six. So again, the 50 day moving average is higher but not by much. So this kinda tells me that currently is just going sort of like depending on what timeframe we're looking at. Because we are not currently looking at the chart, which is looking at two numbers. But this just tells us that things are kind of going sideways or flat. For Facebook. 14. 14 Live Example 2 Shares Statistics: Let's quickly go over the shirt statistics here. And there's a couple of important things I want to highlight here. So you can see that over here, because Apple is a bigger company, their average volume is higher than Facebook. So for the past three months, the average volume was a 108 shares or a 108.65 million shares being traded. The average volume for ten days was a 102.85 million shares. And for Facebook it was around 24 the three month and 24 million for the 10-day average volume. So these are expected because this company, Apple, on the left-hand side, is a bigger company. And you can see that the float here for Apple is at 16.90 billion to almost 17 billion shares out there that we can purchase or investors can go ahead and buy. But for Facebook it's only 2.4 billion or 2.39 billion shares. So Facebook definitely has less shares out there for purchase. Looking at the insiders, we can see that the shares held by insiders is a very small amount here, 0.07%. So this is like management employees that work for Apple here. And we can see that this number is lower, but for Facebook is slightly higher, so 0.07 versus 0.06 three so, and typically when companies have a really high percentage of insiders holding, it's a good sign because it tells us as investors or people who are trying to analyze a company or value the company tells us that the employees and the management actually believe in the company. That's why they're holding the shares and they're not selling them. So the higher the insider shares or hired more shares that are held by insiders, it's, it's, it's typically a positive sign. And over here we can see that the apples percentage held by institutions is around 60%, but for Facebook is around 80%. So again, more institutions or more money from institutions are being invested in Facebook compared to Apple. Because I'm guessing. Also institutions and Alice analysts in the institutions are comparing the two companies out there saying that, hey, you know what, I think Facebook is going to provide a better growth potential for our money. So that maybe in the near future at least so that we can actually put more money in Facebook than we would in Apple. So that's kinda like somewhat the things you have to try to understand by just looking at these numbers here. And the last thing we want to look at here is the short interest, or also known as short percentage of float for both companies. So as you can see for both companies, this short interest is actually very, very low. So for Apple is sitting at 0.5. 4%, which is really low. It's almost 0.5%. It's not even 1% is 0.5%. And for Facebook is a little under 1%. So almost 1%, 0, 0.98%. But as you can see, both companies have very, very low short interests. And this is because of both companies are successful companies. They're both doing really well. They're both massive companies. They're giants, they're grew revenue really well, they're blue chips and no one's really going to bet against them. Because everyone, everyone sentiment is that Apple and Facebook will continue to be successful for years to come. And this makes sense by just looking at the short interests. Because if a company is doing really, really well and really, really stable, well, nobody is actually going to short the stock because they'll, the sentiment is that the company will continue to do well. And if anybody was to short the stock will they most likely will actually end up losing money instead of gaining money. So this is a really good sign to see for both companies. Obviously here, Apple has lower short interest, almost half of Facebook, because Apple is sitting up 0.5% and Facebook is sitting at 1%. But again, when comparing these two numbers to other companies, these short interests statistics are very, very low. So this is really good to see for both companies. Obviously in this case, for comparison will have to favor Apple because Apple has a lower short interests. But in general, both numbers are really low and those are healthy science to see in accompany both companies. 15. 15 Live Example 2 Dividends and Splits: Right, and for the last section of this example, just wanted to quickly go over dividends and splits are first example, none of the companies now there are other companies had dividends or pay dividends and they, none of them actually had split their stock. But in here we do have an example where we actually can go over. Now you can see on the right-hand side here, Facebook did not do a split and they also don't pay dividend. So we'll just focus on the left-hand side for Apple and go over these numbers and sort of cover what they mean. Let's start talking about dividends first. So you can see the first thing here in this section is called forward annual dividend rate. Now notice the word annual here. They've beans per year. And you can see that for Apple, the rate is 0.8 to now notice that this number is actually in terms of dollar amounts. And you can see that because this is annual companies, typically most companies at least typically pay dividends once every quarter, which is, which becomes, which is actually four times every year. So if you wanted to see how much, if you're an Apple shareholder and you wanted to see how many, how much dividend you would get. This is how much you would get in one year for every share that you hold, for every single share you hold, this is how much you would get for a year. So what you need to do is you need to take this number and you need to divide it by four, and that would be your cash payout per quarter or every three months. And this is the exact same thing, but in terms of percentage. So and the next thing over here, you can see that it's the trailing annual dividend rate, right? This is forward, remember forward next 12 month, this is trailing. So this is a forward-looking in the next one watt, this is the projected dividend yield for the company Apple here, and for the trailing one, this is for the past 12 months. And you can see that it was a 0.80, which is good to see because for the last 12 month, this was the dividend yield. And we can say for the next 12 months, we are not, we are seeing a slight increase, but not much, but at least we're not seeing it decrease. So that's a really good thing to actually see. And so it is, apple is slightly going to increase from $0.8 per share or $0.80 per share to 0.82 or $0.82 per share for the next 12 months. It again, these, these things could change suddenly without any notice. If the company suddenly does really, really well, then they could just change these numbers. At any point in time. If the company starts doing bad financially, they might decrease the dividends or completely stopped paying out dividends. Companies, dividends are not guaranteed. Companies can stop paying dividends at anytime. For example, if you go into an economic recession, if companies need to reserve their cash to survive, then, or pay employees when they don't have a lot of revenue, then they can, they have the right to stop the dividend payments. But this is for that anyways, getting back to what we're talking about, this is for the trailing annual dividends. So it was ¢0.8 per share. And this is the same thing in terms of percentage. And you can see that Over here, this is just another number for dividends, but for this different timeframe, so five-year average dividend yield. So it is looking back at the five-year and grabbing an average here. So in terms of average, we are seeing this number being low because the average was 1.46, but there is a reason for it. And again, this is because of the economic situation. So if the economy's not doing good, companies have the right to completely cut the dividend by certain amount or just completely halted and not pay. The next thing is payout ratio. So this is one of the things I pay attention to in this section. And this is really important because payout ratio tells us that how much, in terms of paying out dividends, how much the company is actually paying dividends relative to how much they're actually making. And you don't want to see a company because there are companies out there that are using a lot of their revenue and earnings to pay out a dividend because they want to attract more investors and that's not a good thing. So typically rule of thumb is that you want to have a payout ratio of 50%. Sometimes if you're seeing anything higher than 50, that's a red flag to me because a company is using a lot of their revenue to pay dividends instead of using the same revenue to invest into the, back into the business and help it grow. So this is a healthy thing to see because this number is less than 50. Again, remember, that is just a rule of thumb. There's no hard number for it, but pay rate ratio of 24-25 is healthy. Anything higher than 50% is actually a red flag. I've even seen companies that have a PE ratio of over a 100%, which is a really, really bad sign because it tells me that the company is not only they're using all of their money to pay out dividends, they actually borrowing money. Anything beyond a 100% means they're borrowing money to pay their shareholders dividends. So keep a, if you're investing in a company or if you're valuing a company that does pay out dividends, keep an eye out for the payout ratio here and make sure this number is low and it's not high. So anything less than, again, 50 is a good number, 50% is a good number. Anything higher than 50%? I would start to get worried and it would serve as a red flag to myself. Aptitude dates that we have to consider here and the first date here is just called the dividend date. This is very simple. It just means that simply the date where the company is going to distribute the dividends to the shareholders. So in this case, November 12th, 220th thousand is when the company is going to pay out the cash to the shareholders. Again, it depends on how many shares people hold, what the percentage is. For example, what is the percentage of dividend or what is the rate? And based on that, the company or Apple here as a company, we'll distribute the dividend to any existing shareholder on this date, on this dividend date here. So for apple right now. As of recently, they distributed dividends on November 12th, 2020. Now, shareholders, shareholders don't necessarily get it on exactly that. They might take up to one to three days for the broker to actually settle those things. And then investors will see the dividend come through their brokerage account where they're holding the stock for Apple. And the next thing is called ex-dividend date. And this is simply tells us that breakdown for Apple is as of November sixth, 2020. But this simply tells us that ex-dividend date tells us that for whoever that was actually holding the stock or was invested in the stock before the ex-dividend date. That means dose shareholders. And those investors are actually going to get the dividend on this date here, on the dividend date. So November 12th, if someone bought this stock or bought or invested in Apple stock on or after the ex-dividend date, then they will not receive the dividend on the dividend date here. So for example, if I was holding the Apple, if I'm just going to use these dates here. So if I was invested in the Apple stock and I bought it, let's say for example, November first, which is before November six. Then I was I actually bought the stock or invested before the ex-dividend date. So if I bought it on November first, then on the dividend date, which is November 12, I would receive my cash payment of for my dividend. But if I bought on November sixth or if I bought on November's seven or eight, then I will not receive the dividend on November 12th. I would have to wait another quarter so that I can actually get the dividend for that. Apple during their next, next time they actually distributed dividends. So again, before this date, you will receive, if you invested before this date, you will receive your dividends on this date. If you invested on this day or after this day, you will not receive your dividends during that quarter and you'd have to wait one-quarter to get to get your dividends. So that's just those are that's what those two dates mean. The last few things here. So last split factors. So Apple has split their stock multiple times, but this is just talking about the last one. And the last one was a four to one split. It means that 4-to-1 means that if I was holding and let's say that the stock price was $500. Or actually let's round that up. Let's say the stock price for Apple was $400. After the stock split, the stock price will be $100 per share. So instead of $400 per share, there'll be $100 per share after the split. And the other thing is if I, as an investor, if I was holding ten shares before this split, after the split, I'm going to have 40 shares. So I'm going to have four times as, four times the shares as I initially had. And this is just to balance out or even out my net total so that I'm not really taking any losses. And again, this is that's what the last, That's what split is. And the last split factor, we're ratio for Apple was a four to one split. And then the last split date was August 31st, 2020. 16. 16 Final Words: So we have now reached the end of the course. And I just would like to say congratulations for finishing the course and watching all the way through. I'm hoping by now you've acquired the necessary skills to actually value companies side-by-side or in isolation. And to be able to have the ability to be able to determine whether a company is undervalued or overvalued. And if you're planning to become an investor or an intelligent investor, hopefully this skill set will help you choose the right companies to invest in. And one note I would like to make is that throughout this course we covered a couple of examples. At each example had several companies. I do want you to keep in mind that these companies are just used for educational purposes only. So just because I mentioned the company here, I'm not telling you to go and buy it. It's just purely for educational purposes so that you can actually learn and develop the skill set necessary to value a company. So, and another thing I'd like to bring to your attention is that things changed quickly over time. So whatever we see here, these companies might exist in the future, they might not exist in the future. The prices for them could go really high or really low and we want to know, so this is again, purely for educational purposes. It's not meant to tell you which stocks to invest in, which stocks not to invest in. It's just teaching you how to value companies in the same sector or compared to companies to their peers. So this is very, very important to know. And another thing to note is that everything changes over time. So as the, as of the time of this recording, these are the numbers that we see for these companies recovered in the examples. And tomorrow all these numbers could change a month from now, could change five years from now. These companies that all the numbers recovered can change, maybe for the better, maybe for the wars. We won't know, but I do want you to understand that. So the important thing about this course is that it's just, it's, it's an educational purposes so that you can actually learn how to value companies. And I just want to say thank you so much for actually enrolling in the course. I hope this was useful to you. I hope you learn something. And please, if you did learn something, feel free to share it with your family, friends, relatives, coworkers, or anyone who you might think will benefit from enrolling in this course. So thanks again and hope to see you in my next course.