Value Investing Made Easy - Amazon S3 · What is Value Investing ? As a value investor, you only invest in companies with strong business fundamentals – solid track record, sustainable

Value Investing Made Easy

Brought To You By : ShareInvestor.com

Product Manager : Jery Lai

Famous Value Investors

What is Value Investing ?

As a value investor, you only invest in companies with

strong business fundamentals – solid track record,

sustainable competitive advantage, good growth

prospects, strong financial position and great

managements.

Financial Analysis Income Statement Analysis (Profit & Loss)

Balance Sheet Analysis

Cash Flow Analysis

Management Analysis Shares Holding & Buyback

Fundamental Ratios

Industry Analysis Stocks Comparison

VALUE INVESTING Fundamental Analysis

What are the criteria to be checked?

Financial Analysis (income statement analysis)

The income statement shows the record of a company’s

operating results for the whole year.

It also serves as a valuable guide in anticipating how the

company may do in the future.

FINANCIAL ANALYSIS

1. Earning Per Share (EPS)

Total Income

Total No. of Shares

earnings per share remains the

industry standard in determining

corporate profitability for

shareholders

Income Statement Analysis

Annual Report

2. Price Earning Ratio (PE)

Current Share Price

EPS

The P/E ratio tells how much the

market is willing to pay for a

company’s earnings

EX. ABC Company EPS RM0.20

and market price is RM2.00 so the

PE will be RM2.00/RM0.20 = 10

Investor willing to pay 10 times for

ABC company’s earning

FINANCIAL ANALYSIS Income Statement Analysis

Annual Report

3. Net Operating Margin

Total Income

Total Revenue

Profit margin is very useful when

comparing companies in similar

industries. A higher profit margin

indicates a more profitable

company that has better control

over its costs compared to its

competitors.


Annual Report

Preferably more than 10%

4. Revenue & Profit Growth

Current Year Total Revenue

by analysing historical revenue

and profit growth, you can

assess the potential for growth

in the future

Last Year Total Revenue X 100%



Dividend Per Share

5. Dividend Yield

Measures how much dividends

the company pays out

compared to the stock price.

Ideally consistent dividend

yields between 4% - 8%.

Current Share Price X 100%

Yearly Dividend Per Share

6. Dividend Payout Ratio

Measures the percentage of a

company's net income that is

given to shareholders in the

form of dividends

Earning Per Share X 100%

DIVIDEND

Ex. Share Price = RM 1.00

Full Year Dividend = RM 0.05

Yield = 0.05/1.00 x 100% = 5%

Ex. EPS = RM 0.20

Full Year Dividend = RM 0.05

Payout = 0.05/0.20 x 100% = 25%


6. Price Earning To Growth (PEG Ratio)

PE Ratio

better understanding of whether

or not a company’s stocks is

overpriced, underpriced, or just

right.

If a company’s stock is fairly

priced, then it’s P/E Ratio should

equal it’s annual growth rate.

Annual EPS Growth

Ex. PE Ratio = 10

Earning Growth Rate = 20%

PEG = 10/20 = 0.5

7. Compound Annual Growth Rate (CAGR)

The year-over-year growth rate of an

investment over a specified period

Below 1.0 = Undervalued

Above 1.0 = Overvalued

Financial Analysis (balance sheet statement

analysis)


Current Assets, Non-current Assets, Total Assets,

Current Liabilities, Non-current Liabilities, Total Liabilities, Total Equity

FINANCIAL ANALYSIS

Annual Report

Balance Sheet Analysis FINANCIAL ANALYSIS

Current Assets

Inventories

Trade Receivables

Cash and Deposit

Non-Current Assets

Property, Plant and Equipment

Investment in Subsidiary

Goodwill & Trademarks

Current Liabilities

Trade Payables

Loan and Borrowings

Deferred Tax

Non-Current Liabilities

Long Term Loan and Borrowings


1. Net Tangible Asset Per Share (NTA)

Total Net Tangible Assets

Also known as "net asset value" or

"book value"

Total No. of Shares

2. Price/NTA

Indicates whether the stock is overvalued or

undervalued

Ex. Share Price = RM 1.00

NTA = RM 2.00

Price/NTA = 1.00/2.00 = 0.50

* 50% discount on the assets

Current Share’s Price

NTA

FINANCIAL ANALYSIS

Annual Report

3. Debt Ratio

Debt ratio shows the proportion of a

company's assets which are

financed through debt

The higher the ratio, the greater risk

will be associated with the firm's

operation

Total Liabilities

Total Assets

4. Current Ratio

Current Assets

Current Liabilities

FINANCIAL ANALYSIS

A liquidity ratio that measures a company's

ability to pay short-term obligations.


Annual Report


Net Profit

5. Return on Equity - ROE

How much profit a company makes

from shareholder equity. The

higher the ROE, the better the

company is at generating profit for

shareholders.

Shareholder’s Equity

Net Profit

6. Return on Asset - ROA

ROA gives an idea as to how

efficient management is at using its

assets to generate earnings.

Total Assets

FINANCIAL ANALYSIS

Warren Buffet’s investment

require 15% of ROE

Financial Analysis (cash flow statement analysis)

Cash Flow Analysis FINANCIAL ANALYSIS

Annual Report

Operating Activities

Financing Activities

Investing Activities


What is Cash Flow ?

Cash flow is the amount of money coming in to a business and the amount of money

going out. It is a key indicator of financial health.

Financing Activities

Investing Activities

Measure of the cash outflows and inflows related to the purchase and sale of

investments

Operating Activities

Measure of the amount of cash generated by a company's normal business

operations. Must be always Positive to sustain the company.

Positive mean receiving cash from issuing stock, receiving cash from issuing

bonds or loan from banks.

Negative mean spending cash to repurchase previously issued stock, to pay

down debt, to pay interest on debt and to pay dividends to shareholders.

Positive mean Return from investments. Negative mean cash have been

reinvest to expand the business.


OPERATING

CASH FLOW

INVESTING

CASH FLOW

FINANCING

CASH FLOW

BALANCE

HEALTHY

CASH FLOW

OPERATING

CASH FLOW INVESTING

CASH FLOW

FINANCING

CASH FLOW

LESS HEALTHY

CASH FLOW

CASH PER SHARE

A company's total cash divided by its shares outstanding. Value Investors always look

for cash stable companies.

Ex. Share Price : RM1.00 / Cash Per share : RM0.20

:: Price / Cash Per Share = 1.00/0.20 = 5 Preferably ratio is around 3

Management Analysis (Shareholders)

Shareholders Analysis MANAGEMENT ANALYSIS

What is Shareholders Analysis?

Management holds a company a

significant no. of shares > 40% is a

healthy sign.

Management buy back their shares

from the market from time to time is

another good indication of confidence

level.

Annual Report

Shareholders Buyback MANAGEMENT ANALYSIS

Shareholders buy back their company’s shares are

always is a good indication.

Example : BJFood

[23 – 25 July]

BJFood price spike 80% in

3 days to

RM3.00

CEO Shares Buyback on 7 July 2014

Insider Trades Case Study

21 July – Price : RM1.73

ANNOUNCEMENT

STOCKS COMPARISON

Stock Comparison give you an idea how is your stock doing compare with the

same sector players.

STOCKS COMPARISON VALUATION & GROWTH

VALUATION

GROWTH

STOCKS COMPARISON PROFITABILITY & MANAGEMENT

PROFITABILITY

MANAGEMENT

STOCKS COMPARISON LEVERAGE & LIQUIDITY

LEVERAGE

LIQUIDITY

Summary

Make Value Investing simple and safe by selecting a company

with fundamental supports.

Low PE Ratio (Less than 10)

Net profit margin > 10%

Return on Equity > 15%

Low Debt Ratio (Debt/Asset <0.3)

Always perform positive operating cash flow

Management holding significant shares > 40% of total shares

Always remember to compare the stocks among the same

sector stocks.

Must check the quarterly financial

results from time to time

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Value Investing Made Easy - Amazon S3 · What is Value Investing ? As a value investor, you only invest in companies with strong business fundamentals – solid track record, sustainable

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