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RE: [sharechat] Technical question - fundamentals

From:	"Gordon King" <gordon.k@clear.net.nz>
Date:	Tue, 14 Mar 2000 11:40:58 +1300

Answer, it depends.

Another way of looking at shareprice valuation is capitalised current earnings plus the present value of growth opportunities (PVGO), little talked about these days.

In effect, every bit of the share price not explained by present earnings is explained by the markets asessment of the value of the growth opportunities.

So can't answer the question unless you know the market, industry, sector, growth and how trendy it is. Theory would suggest that both shares are fairly priced based on current state of knowledge of the market, and the future market.

Gordon

-----Original Message-----
From: owner-sharechat@sharechat.co.nz [mailto:owner-sharechat@sharechat.co.nz]On Behalf Of Derek
Sent: Tuesday, 14 March 2000 00:08
To: sharechat@sharechat.co.nz
Subject: [sharechat] Technical question - fundamentals

I have question for investors with good theoretical and fundamental background.
I do not looking for market speculation in this case. Let's ignore this factor.
If you have 2 companies in same business field with fundamentals as below:
Company A:
             Total Issue :   90,418,791

             Full Year Profit :    -13,497,702.14 (NZD)
             Earnings/Share:    -98.7250 cents
             Price/Earnings Ratio:    -0.3950
             NTA/Share:      57.3344 (NZD) cents
             Dividend/Share   0.0000 (NZD) cents
             Dividend Yield:    0.0%
The share price is currently very close to 19 months high.
Company B:
            Total Issue:   115,532,071
             Full Year Profit:   3,827,000.00 (NZD)
             Earnings/Share: 3.0355 cents
             Price/Earnings Ratio: 9.5536
             NTA/Share:   45.9898 (NZD) cents
             Dividend/Share:   0.0000 (NZD) cents
             Dividend Yield:     0.0%
The share price is at least 15 years low.

Just base on fundamentals. Which company will be your choice for medium to long term investment?
Could you make comment on your decision?
Regards,
Derek

References

[sharechat] Technical question - fundamentals Derek

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