Earnings Per Share

Definition:  EPS is the net income available to common shareholders of the company divided by the number of shares outstanding.

Make sure the company is not trying to manipulate their EPS numbers to make it look like they are more profitable. Also, look at the growth in EPS over the past several quarters / years to understand how volatile their EPS is, and to see if they are an underachiever or an overachiever. In other words, have they consistently beaten expectations or are they constantly restating and lowering their forecasts?

For eg:  If the total income is $ 1 million , and total shares is 1 million then EPS is $ 1 million/1 million shares = $1.

EXERCISE

Which one of the below is good share to buy based on EPS?

Company A:  EPS - $1, market price $100
Company B:  EPS - $2, market price $150

Book Value

Definition of book value:  The value of a security or asset as entered in a company's books.

In simple words, book value is the value we get if the company is sold.  The valuation of assets and liabilities are valued by the auditor and the company so apply margin of safety.  It is one of the best attributes to ascertain the intrinsic value of a stock, but remember to consider various other attributes. 

As said, be careful and remember we will get paid the book value only if the company is liquidated, which would not occur in the near future.  If the company could raise the book value year after year, stock price will also increase if not in the near term, but sure in the future when buyers show interest on the stock.  During a bull run, investors will show interest on companies with good price to book value ratios.

Many outdated companies may be found with best book value to price ratios so select the companies that shows book value increase year after year.  Book value can also be increased if the company issues new shares and thereby raising share capital.  This type of raise in share capital should excluded while valuing a share.  We should only take into consideration book valve appreciation shown by the business and not any other methods such as onetime profit and share capital issues, one time special dividend, etc., as these would not occur year after year.

I am sure you will find one best stock to buy if not wait until you get the best price.  Remember you should wait as long as 5 years after buying a stock.  Don't worry if the price goes down deeper, instead buy some more if you can.  If a stock could allow you to wait for 5 years! that is a good stock.  Until then be happy getting dividends.  A good stock will not only give dividends year after after, but it will also increase them every few years once.  Happy investing...   

If you any doubts and comments, please let me know through comments.  Thank you.

Share Market

Here Are 18 Brilliant Quotes From The Greatest Investor Of All Time

 

The  Oracle of Omaha, Warren Buffett born on August 30, 1930 (82 years old).
He may be one of the wealthiest people in the world.  But he's also known as the billionaire next door.  He comes off as humble and sometimes uses self-deprecating humor.  Maybe it has something to do with the fact that he's lived in Omaha, Nebraska for most of his life.

Buffett also uses extremely easy-to-understand language when referring to business and investments.

Many of his most thoughtful quotes are found in his annual letters to Berkshire Hathaway shareholders, which are must reads.  But some of his gems come from random interviews, speeches, and op-ed pieces.

We compiled a few of the best quotes from the Oracle of Omaha. If we've missed any of your favorites, let us know in the comments.