Stock Research Part II – Price Metrics

This is part II of the Stock Research education segment. Here is a link to Part I if you haven’t read it yet.

This month’s segment will cover various resources for price metrics. We will start by clarifying what tools and figures Finviz provides us for price data and then move onto some other tools.

Chart

Let’s start with the chart. The default chart Finviz provides is a daily, advanced chart. The chart has many useful pieces of information. Blue lines will mark trend lines of support. These are areas where the stock seems to have a tendency to move up from. Pink lines indicate trend lines of resistance, these are areas where the stock historically has had a difficult time moving past.

You will also see 3 curved lines weaving through the chart. These are the 20(pink), 50(orange), and 200(tan), Simple Moving Averages or SMA. I have linked to a definition from Investopedia but, simply, the SMA the average of the last X units of the chart. For instance, our chart is a “Daily” so the SMAs are an average of the last 20, 50, and 200 days. The SMAs can help us visualize the short, medium, and long term trends of the stock price.

Now, using the table beneath the Finviz chart, let’s move to some financial metrics concerning price. I will be linking to Investopedia.com, an amazing investor knowledge site, for definitions.

P/E Ratio & Forward P/E Ratio

The PE ratio is the current ratio the market is paying for a dollar in earnings. This is usually calculated using the previous 2 quarter’s earnings and the next 2 quarter’s estimates. You need some context for this as high-growth stocks have a different baseline than low-growth stocks and different industries tend to have different baselines as well. With all else equal, a low PE stock is cheaper than a high PE stock.

The forward earnings will shift the view into the future and provide a PE ratio based on how the company is expected to perform in the future. Since the market is forward looking the forward PE ratio may give a hint towards why a stock appears cheap or expensive.

PEG ratio

PEG ratio adds a little more context to the PE ratio. It divides the PE ratio by the annual EPS growth rate to provide a new figure. This new figure may help determine if the stock is fairly priced or not. I will typically look for a PEG around 2 or below unless it will really have some explosive growth opportunity.

Other price metrics

Moving over to the two rightmost columns, we will see the target price of the stock.  The target price is the average price of all of the covering analyst estimates.  This target is typically aimed 12-18 months into the future.

Below that you will see the 52W range, indicating the high and low prices over the past 52 weeks.  This range is followed by the % the current price is off the high and the % the current price is off the low.

In the last column you will see the percentage figure of performance over the past week, month, quarter, 6 months, and year.

 

That’s all we are covering this month, if you have any questions or comments please feel free to include them below or bring them up in the next meeting.
 
Again, this is Part II in a series of educational posts.  If you haven’t read Part I, you can find it here.
 

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