Thanx Greg. Put in layman's term for us (like me) who need that. Listening on TV is too fast for my brain to absorb what their saying, and some of them use big words to feel "bigger" and they miss the true explantion/meaning to their audience...
Thanx Greg. Put in layman's term for us (like me) who need that. Listening on TV is too fast for my brain to absorb what their saying, and some of them use big words to feel "bigger" and they miss the true explantion/meaning to their audience...
For you I should have done all this on a chalk board....
It's true though Greg, you do have a knack for sharing fundamentally sound information on this subject in a way that makes sense to people without compromising the important details.
I'm confident your thread has/will indirectly create an unbelievable amount of wealth for the guys in this community. Truly an award-worthy contribution. Keep it up!
PEG Ratio is another good and easy way to see how a company is valued, especially smaller faster growing ones. I stay below 2.0 in just about all cases. A couple good explanations:
Since we just talked about stock splits and high P/E ratios - and whether or not EARNINGS were important etc....
NetFlix (NFLX) just split it's stock 7 for 1 - meaning for each share you owned - you'd now own 7 times as many -- but that also divides the price by 7 as well.
They had an EXTREMELY high P/E.... IIRC -- 181 !!! Which is just a WOW number.
But let's remember how it got that kind of a P/E... It's because people (buyers) have very high expectations for GROWTH of the business and therefore the EARNINGS.
THEIR EARNINGS just announced today after the close - which beat the street estimates... and they added 3 million new subscribers in the quarter....
The stock spiked after hours by 10%.
Now - let's also take into account that everyone that owned the shares... now has 7 times MORE shares in their accounts! Sometimes - people sell off some of the shares and we know what happens when there's more sellers than buyers... you see a price drop. BUT --- the split is supposed to drive demand from the smaller investor who's willing to pay (in this case) $100 a share versus $700 a share. So perhaps there's buyers coming in, to acquire new shares of the stock. Who the heck knows.
I'll tell you what I do.... I never trade *buy or sell - a stock based on a perceived or announced split. Splits in themselves do not add value. They might temporarily drive some excitement - but that's usually short lived.... In the long run - we want to INVEST in companies that we think will do well going forward. End of story.
I have a significant portfolio -- and I own a whopping 100 shares of NFLX (now it's 700).... because while I think it's a growth story -- it doesn't pay me a dividend - AND more importantly - the AIR / FROTH / PE will come down far faster than it goes up when they have 180 ish P/E!!!! These stocks work when they're working -- and they really really stink up the joint if they so much as whisper that their growth is slowing or their earnings aren't up to snuff.
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