Investing in the JSE — Understanding the market data of a listed company.
So let’s analyze the information above when understanding the data of a company. Understanding this data is crucial for investing as it gives you an indication of how well the company is performing as well as some kind of idea of what return you are going to get on your investment from the company.
Friday’s close: In the last post I talked about markets and the financial markets in particular. These markets operate at certain times. The JSE, in particular, operates from Monday to Friday. 9 am — 5 pm “Friday’s close” refers to the price of a single share (financial security) at which the market closed.
Today’s open: This refers to the price of which the share (financial security)starts to trade at when the market opens. It may be higher than the closing price of the previous day due to demand for the financial security, as is noted above.
Best Bid : This is the highest price that an investor is willing to pay for the share/asset/financial security. In the data both the price as well as the desired quantity are given. In the example above R394.00 is the best bid and 146 shares are wanted. Bids are represented by buyers.
Best offer : The offer price represents the minimum price that a seller or sellers are willing to receive for the security. In the example above the minimum price that the seller is willing to accept is R 394.99 for each of 476 shares. The offer price is represented by the seller of the share.
Volume: This is a very important factor when assessing the value of a particular share. It refers to the amount of shares that are traded in a particular period. Volume gives you a measure of liquidity. Liquidity refers to how easy it is to enter or exit a trade. Higher liquid shares have higher trading volumes. Generally, if you are looking to start trading it is better to buy into shares that have higher liquidity.
Days range: This refers to the price range of the day, the highest and lowest price for the day and it is an indication of the volatility of the share. The larger the percentage range gap, the higher the volatility.
P/E ratio: Basically this is the price of a share divided by the earnings per share. A lower P/E ratio is GENERALLY better.
EPS: This is the earnings per share. It is calculated by taking the companies profit and dividing it by its outstanding shares that are not sold. The higher the companies EPS the higher the profitability of the company.
DPS/TTM: DPS refers to the dividend per share. It is divided by the TTM. TTM revenue refers to a company’s revenue over the trailing twelve months (TTM) of operations. It is an indicator of the financial health of a company. However, some companies choose not to pay out dividends to their shareholders.
Dividend Yield: This refers to the annual dividends paid by companies from their earnings.The calculation for the dividend yield is (annual dividend /the share price) x 100. The higher the dividend yield the better as an investor. It is generally associated with the health of a company, however, not all companies choose to pay dividends.
Market Cap: This refers to the amount of value derived from the outstanding shares in a company. It is calculated by multiplying the outstanding shares by the current market price of 1 share. It is an indicator of a company’s size.
Shares in Issue: These are the shares that are sold and held by the shareholders of the company.
In the next post, let's look at some good shares to invest in and how we can do so as rookie investors.
