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The Valuation Data page in ShareData™ Online (the Analysis Column in the Stock Exchange Handbook) provides some additional statistics and charts which can help in evaluation shares.
Ratios and Statistics
Sales/Share(c): Sales per Share
This is calculated by dividing Turnover by the share price. Some investors believe that, in certain industries, Turnover provides a base value for a company, and in the small business sector (ie, small unlisted companies such as family businesses) turnover is sometimes the basis for sale of the business (ie, price = 1 x turnover).
Tr 5 yr avg: Trailing 5 year average
Each average is the simple arithmetic average over the last five years (obviously at least ten years worth of data is required to calculate this, although only the last five years are shown). Where this appears below year-on-year percent change figures, the trailing 5 year average is the average of the percentage change figures, thus showing the stability of the growth curve
Price/Sales ps: Ratio of the share price to Sales per Share
This ratio expresses the relationship between the Sales/Share(c) figure and the share price.
Price/NAV: Ratio of the share price to Net Asset Value per share
This ratio expresses the price as a factor of the NAV per share. A ratio of 1 obviously means the NAV per share is equal to the share price. If the ratio is less than 1 the share is said to be trading a discount to NAV, and if the ratio is greater than 1 the share is said to be trading at a premium to NAV.
Price/Cash Flow: Ratio of the share price to Cash Flow per share
This ratio shows how much cash the business generates in relation to each share.
3 Yr Beta
A measure of the volatility of the share relative to the volatility of the market as a whole (as measured by the All Share index). The default beta values in ShareData™ are calculated using weekly data for three years up to the end of the relevant reporting period. No beta is quoted if there is less than three years data available. For more information see the description on the Ratios and Statistics page.
Tr 3 yr avg TotRet: Trailing 3 year average Total Return
The total return for any particular twelve month period is equal to the capital gain in the share price plus the value dividends accruing to shareholders during the same period. The total return is usually expressed as a percentage of the share price. Hence a share which rises from 100c to 130c over a year and pays 7c in dividends has a total return for the year of 37%.
The trailing 3 year average is the simple average of the total returns for each of the last three years. For the ShareData Online Valuation Data page, this is the last three fiscal years for the company.
Tr 5 yr avg TotRet: Trailing 5 year average Total Return
See Tr 3 yr avg TotRet above. This is the same calculation over a longer period (5 years).
Volatility
This is a measure of the inherent risk of the share, and literally measures how much the shares go up and down in price (cf beta, which is a measure of risk relative to a benchmark). We use the standard deviation of the month-on-month percentage price change, usually over a 36-month period. All other things being equal, the higher this figure, the riskier the share. A figure of 12.5 tells you that, two-thirds of the time, the month-end price change was within 12.5% of the average month-on-month price change (either up or down), and that 95% of the time, the price change was within 25% (double 12.5%) either up or down. Put more simply, 12.5 means the share was within a 25% 'band' around the price change average two-thirds of the time, and within a 50% band about 95% of the time.
Risk/Return Profile
The Risk/Return profile plots the Volatility of a share against its compound total return (over 3 years where available). Ideally, a share should be in the north-west (top left) quadrant, which means it is giving above-average returns a below-average risk.
Note that the X and Y axes are determined from the values for all JSE shares, and are set at 2.5 standard deviations of the population averages for each axis. Obviously this means that some companies fall outside of these scales. You will notice that the R/R graphs for some shares have a blue frame within the graph – this represents the default scale, and makes it possible to see how far a particular share falls outside of the population averages (if the share is an outlier).
Note that the position of the axes has a dramatic effect on the quadrants. Every company can be made to fall in the north-west quadrant if the axes are set far enough apart. It is important, therefore, to look at the values on the axes to see if these are consistent with your risk/return expectations.
PEG Inverse Graph
PEG (P/E Growth ratio) expresses the relationship between a company's P/E (Price:Earnings ratio) and growth. PEG is perhaps better calculated using forecast growth, but for the sake of consistency we use historical growth (over 5 years) for ShareData™ and the Stock Exchange Handbook.
Adherents of PEG believe that a company's growth rate should at least equal its P/E (eg, P/E of 10, growth rate of 10% p.a., PEG = 1).
PEG is often calculated as P/E to growth, but this produces a somewhat counter-intuitive figure where a 'good' PEG is less than 1 and a 'bad' PEG is greater than 1. We use inverse PEG because it is easy to interpret.
Pointers on Interpretation of the PEG Inverse Graph
The graph shows the position of a company's PEG ratio (inverse) in relation to the P/E (X-axis) and historic growth (Y-axis). If the marker is on the line, it means the PEG ratio is close to 1. The further up the line, the higher both the P/E and historic growth.
A marker in the shaded area means that PEG is less than 1 (ie, historic growth less than the P/E ratio). This may mean the share's market rating (P/E) is high in relation to historic growth. Conversely, a marker in the white area means PEG is greater than 1, which may mean the share's P/E is low in relation to historic growth (ie, potential value stock).
It is important to remember that historic growth is not always predictive of future growth – sometimes a share has a poor PEG because the market expects a significant future improvement in HEPS growth (ie, relatively high P/E and poor historic growth equals poor PEG). Conversely, a very strong PEG may mean very high historic growth which cannot be sustained in the future.
Where possible both axes for chart are set at 0 to 30. A blue or dotted frame inside the chart area indicates the 30-point position for companies with either growth or P/E above 30. A marker lying west of this frame indicates a very high P/E, and a marker lying north of this frame indicates a very high historic growth. A high north-west position obviously indicate high growth and high P/E.
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