- P/E helps in determining whether the stock is undervalued or overvalued.
- Relying only on P/E is not advisable while valuing a stock as market players need to consider other valuation multiples as well.
- Generally, market participants believe that a higher P/E means that the stock is overvalued.
When it comes to valuing a stock, P/E is the most commonly used multiple. However, companies with no or negative earnings should not be valued using this multiple.
As most of the market players are aware, the P/E ratio gives an idea as to how much the market would pay today for the stock considering the future or past earnings.
Just by looking at the P/E multiple and analysing whether the stock is cheap or expensive is not advisable.
Let us have a look at 8 stocks and their Price to Earnings multiple.
*As on August 4, 2020
List of Companies (Source: NZX)
Ascension Capital Limited (NZX: ACE)
The company has changed its name from TRS Investments Limited (NZX: TRS) to Ascension Capital Limited (NZX: ACE). For the 12 months ended 31st March 2020, the company reported a total comprehensive profit of $15,000 as compared to a loss of $193,000 in 2019. Total operating income from activities stood at $95,000 as compared to $3,000 in 2019.
As per the release dated July 3, 2020, Joseph van Wijk has resigned as the Director. The Board has made an appointment of 2 new directors - Sean Joyce and Roger Gower.
Cavalier Corporation Limited (NZX: CAV)
Cavalier Corporation Limited has released a new transformational strategy that places the company with an all-wool and natural fibres business model. The four strategic pathways through which the company’s growth will be driven are:
- Grow wool flooring market;
- Grow the company’s share of the market;
- Expand its presence;
- Innovation and Future Thinking.
The company stated that financial benefits of transformation strategy as well as return to profitable growth is anticipated from FY 2023 onwards, after initial 12 to 24 months of investment, and full benefits are expected from FY 2025 onwards.
ikeGPS Group Limited (NZX: IKE)
The company has successfully completed the Institutional Placement and Institutional Entitlement Offer. The institutional placement of NZ$9.8 million was oversubscribed with participation from new as well as existing investors including many new Australian institutional investors. The institutional entitlement offer component of the fully underwritten 1 for 7 pro-rata accelerated entitlement offer was supported by institutional and sophisticated shareholders and directors.
The company stated that it would be garnering about NZ$19.7 million total from the placement and entitlement offer.
Plexure Group Limited (NZX: PLX)
The company has recently made an announcement that it intends to investigate undertaking an IPO as well as applying for admission to Official List of ASX.
This might involve the company to change its primary listing from the New Zealand Stock Exchange (NZX) to the ASX and re-classifying current NZX listing as an NZX Foreign Exempt listing, which will enable its shares to continue to be quoted on the NZX.
The company will has its headquarters in Auckland and will be domiciled in NZ.
General Capital Limited (NZX: GEN)
General Capital Limited came forward and made an announcement about its financial results to March 31, 2020. Its total assets were up by 114% to $51.2 million and net revenue witnessed a rise of 48% to $2.0 million. Its net profit after tax encountered a rise of 128% to $130k.
On August 4, 2020, the stock price of GEN witnessed a rise of 0.91% on an intraday basis and ended the session at NZ$0.111 per share.
Blackwell Global Holdings Limited (NZX: BGI)
For the 12 months ended 31st March 2020, the company reported total revenue of NZ$0.436 million, down by 47 per cent from the previous year. The company reported a loss from ordinary activities after tax attributable to a security holder of NZ$0.693 million. The company continues to explore new innovative initiatives to get more funding with a view to continue growing finance company operation moving forward.
The company’s loan book stood at $1.57 million and the average lending to value ratio (LVR) was very low at an average of 52%.
Financial Results (Source: Company Reports)
Evolve Education Group Limited (NZX: EVO)
EVO Changes its Balance Date and Provides Occupancy Level
Evolve Education Group Limited (NZX: EVO) has changed its annual balance date from 31 March to 31 December.
In the release dated July 30, 2020, the company stated that some media reports in NZ have quoted sources advising that the occupancy levels have decreased by up to 20 percent in the early learning sector because of the effects of coronavirus. The company has advised the occupancy figures for the week to July 19, 2020. For NZ, it was 68.9% and, for Australia, it was 75.6%.
Good Spirits Hospitality Limited (NZX: GSH)
The company has lately tendered its financial audit which has resulted in a decision to hire BDO New Zealand as its auditor and the resignation of PwC. This appointment will be put to the company’s next AGM for ratification.
The Board of Good Spirits Investments Limited has recently made an announcement that Anthony Laus has been appointed as Chief Financial Officer. As per the release, the role became effective on March 16, 2020.
The sole motive of an investor is to grow his/her capital over a period to meet financial goals. In pursuit of this, investors are in a constant hunt for stocks that have capital appreciation potential and those that pay dividends, which one can reinvest to further increase the rate of return. Dividends can also be seen as an incentive for an investor to hold the stock for a longer duration of time, especially when the overall market enters a bear phase, or the underlying invested company goes through business troughs and peaks.
Stocks that have high dividend yield are considered to be a safe bet, but to take a blanket call just on dividend yield would be naive, as there is more to be analyzed to make a sound judgment on the ability of the business to keep paying a dividend over long periods.
Companies over time, increase dividend payout, and in the long term, an astute investor can reap high rewards by picking good dividend stocks, across sectors, thus diversifying and reducing the volatility of one’s portfolio. Investors in New Zealand can reap the benefit of dividend imputation credit and further increase their overall return on investment.
So, how should one pick a dividend stock? How to invest in stocks that have the wherewithal to not only pay a dividend but also increase dividend payout over the years?
With Kalkine, you will find answers to these questions, as we conduct a detailed analysis of companies based on quantitative and qualitative parameters.
Sound dividend stocks are investors' delight. They provide the benefits of capital appreciation and the joy of constant income despite the market volatility.