Educational articles

What is a stock split?

Corporations may decide to make their shares more attractive by conducting a stock split. In this article we discuss why companies have stock splits and what happens to the shares. Definition A stock split occurs when the companies decrease the stock price and issues more shares so the market capitalisation stays the same. If a 2 for 1 stock split occurs the stock price is halved but the shareholder receives twice the amount of shares, so the total value remains …

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4 ratios to measure profitability

The profitability of a company is an important metric because it can give a good indication to the company’s financial health. In this article we outline 4 ratios investors can use to evaluate the company’s profitability. 1.EBITDA margin This ratio can identify the earnings of a company before interest, depreciation, and amortization as a percentage of the revenue. This will show the company’s operating profit in comparison to the revenue. The formula for EBITDA Margin = Earnings before interest, depreciation …

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Why inflation is bad for markets?

We have discussed what stocks do well in high inflation in our previous article, but in this one we discuss why share markets do not like inflation. Increased cost of raw materials for companies may cause expenses to increase. Companies will pass these increased costs to consumers making the product more expensive. The increase of price may mean less units are sold as demand is decreased.   If there is a general level of price increases of everything and there …

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4 factors to look for when searching for dividend stocks

Investors looking to use their investments to fund their living expenses often try to find a stock which pays a good dividend. Below are some of the factors to look for in a company to identify a good dividend paying stock. 1. Dividend Yield Investors can use the dividend yield ratio to determine the size of dividend which will be paid to the shareholder. The formula is Dividend Yield= Dividend Per Share/Price Per Share This compares what annual payout is …

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What does the P/E ratio reflect?

Fundamental analysts use ratios to evaluate the intrinsic value of a stock. One of the most common ratios they use to do this is the P/E ratio. In this article we discuss what the P/E ratio reflects and how to calculate it. What is the P/E ratio? This ratio looks to see how expensive a stock is and also how much stock investors are willing to pay for each dollar of earnings. Formula: Price to earnings ratio = current share …

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