Let us start with a story. One day a ship was stuck at a dock and was not starting. Many people on board tried tons of techniques and took good enough time but could not succeed. So they called a very veteran technician to look into the issue. He came to the engine room, gave one single tap in one spot of the engine and the ship was brought to life. The people around him were astonished and asked how could he do that with just one tap? He replied, it is not about how many taps I gave, it is about knowing where to tap.
Analyzing Bangladesh stock market reports or stocks is quite similar to that. Among the plethora of information, we need to know which information is valuable for us. There are few indicators that can give insight about a stock. So, when we are wondering how to analyse Bangladesh stock market, we need to have a quick look at these information to keep us ahead. In this article, we will pin point few insights that will help us to analyse Bangladesh stock market reports in a proper way.
This is an old school method to analyse stock market reports. The saying old is gold speaks for itself. Many individuals prefer to create an understanding of the current market situation of a stock based on the historical performance of that particular stock. Looking at the supply and demand of the stock will give us a bird’s eye view on the direction of the stock. We have to consider the previous performance of an organization while going through a stock market report. This will give us few indications and trends that can be applied in case of that particular stock because of its history.
One of the key indicators of a stock’s performance is the P/E ratio of the stock. To cut to the chase, P/E ratio is the value we get when we divide stock’s market value per share by its earnings per share. When we have knowledge of the P/E ratio of a particular stock, the best practice is to compare the P/E ratio with other competitors and industry standard. This will give us a better idea on the position of the stock. In general, lower P/E ratio is an indication of a promising stock. So while trying to analyse Bangladesh stock market, looking at the P/E ratio of that particular organization and comparing it with competitor and industry standard will give a valuable insight.
EPS (Earning Per Share)
When we analyse Bangladesh stock market reports, we give emphasis on this particular indicator. Earnings per share is calculated by dividing net income of the company with total outstanding shares. Earnings per share is an important indicator of the performance of a stock. When analysing Bangladeshi stock market reports, looking at the earnings per share of a stock will give good idea. If the stock is profitable, then it will have higher EPS and vice versa. A company with higher EPS indicates their shares are valuable. Having higher EPS makes a stock valuable to other investors as well.
As EPS of a share shows how efficiently the revenue of a company is flowing down to investors, it should be given high priority to analyse Bangladesh stock market reports. By comparing the EPS of a particular stock with its competitors, we can also get an idea how that particular stock is performing compared to other players of the industry.
PE and PEG Ratio
To understand PEG ratio, let us discuss PE ratio at first. PE ratio is the ratio of a company’s share price to the company’s earnings per share. PE ratio is an indicator that shows if an organization is overvalued or undervalued. In general, a lower PE ratio indicates to a good performing stock. Because from a stock with lower PE ratio the investors are most likely to get more earnings from their investment. So from the point of view of an analyst, lower PE ratio is a good sign for the stock and the investors alike. Now let’s come to the point of PEG ratio.
The PEG ratio levels up the PE ratio by considering the growth of a company. To identify the PEG ratio, we have to divide the PE ratio by the 12 month growth rate of the stock. We can easily get insights from the historical growth rate of the stock to make an estimate of future growth rate of the stock. In general, a stock is considered valuable if it has a lower than 1 PEG ratio.
Return on Equity
Return on Equity is an indication towards a company’s ability to generate positive returns for the shareholders. To calculate ROE, we have to divide net income by average shareholder’s equity. On another note, as ROE is calculated by considering all assets minus liabilities, thus it can be also deemed as return on assets minus liabilities. To analyse Bangladesh stock market reports, look at the ROE of a stock for a specific period. If the stock indicates it has a gradual growth on the ROE, then it is a good sign for the stock. Investors are most likely to invest on those stocks that will give them a good return against their investment. Thus it is important to consider not only the current ROE of the stock but also the historical trend of the ROE.
Last but not least, there are many professional analyst and institutions that recommends a particular stock considering all the viable factors. This is also an easy but effective way of analysing Bangladesh stock market. If anyone do not want to go into the details by themselves, they can always take the recommendations of the field experts, just like the veteran technician we mentioned in the very first story of this article. In Bangladesh there are many brokerage houses than can help you with that. Expert’s suggestions combined with individual research can be an effective combination to analyse Bangladesh stock market reports and become an intelligent investor.
These are among the many indicators and factors to consider to analyse Bangladesh stock market reports.