Educational articles

What helps determine the share price of a takeover target?

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News of Northern Star Resources (ASX:NST) acquiring De Grey (ASX:DEG)  caused the stock De Grey to jump 29% on the day. In this article we discuss why the acquired company jumps in price when there is a takeover offer. When a company is being taken over (acquired), its stock price often increases due to several factors related to the terms and expectations of the acquisition. Here’s why this happens: Acquisition Premium: Typically, when one company acquires another, the acquiring company …

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What is the best performing index of all time?

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The best-performing index of all time, in terms of historical total returns (capital appreciation plus dividends), is generally considered to be the NASDAQ-100 Index. This is largely due to the growth of technology stocks and their increasing dominance in the global economy. It has consistently outpaced other major indices in terms of total returns, especially during periods of technological innovation and market optimism. Why the NASDAQ-100 is the Best Performing: Heavy Tech Exposure: The NASDAQ-100 includes 100 of the largest …

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How do you calculate a Forward P/E?

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The Forward Price-to-Earnings (P/E) ratio is a variation of the traditional P/E ratio, but it uses projected (or forward) earnings for the next 12 months instead of historical earnings. It is useful for evaluating a company’s valuation based on its future expected performance. Here’s how you calculate the Forward P/E ratio: Formula: Forward P/E = Current Share Price/ Projected Earnings Per Share (EPS) for the next 12 months Find the Current Share Price: Look up the current price of the company’s stock. This is the market price per share. …

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How do bond yields perform in high inflation?

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In a high inflation environment, bond yields typically rise. Here’s how it works: Inverse Relationship Bond prices and yields have an inverse relationship. When inflation is high, investors demand higher yields to compensate for the decreased purchasing power of future interest payments. Central Bank Response Central banks, often raise interest rates to combat inflation. Higher interest rates lead to increased yields on newly issued bonds, which can also push down the prices of existing bonds. Impact on Different Bonds Long-term …

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What does a return on capital mean?

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Return on Capital (ROC) is a financial metric that measures the efficiency and profitability of a company in generating returns from its capital. Specifically, it assesses how well a company uses its capital—both debt and equity—to produce profits. Formula: Return Of Capital =Net Operating Profit After Tax (NOPAT)/Total Capital NOPAT: This represents the profit generated from operations after taxes, excluding interest expenses. Total Capital: This typically includes both equity and debt used by the company to finance its operations. Interpretation: …

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