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Stocks Comparison

Sarmaaya Desk
Sarmaaya Content Team

Stocks Comparison

In today’s world, Investors face many challenges when it comes to deciding where to invest. One of the biggest problems for the investors to invest is the sheer speed of information and data. Also, there is too much information to consider when it comes to investing. So, investors cannot blindly invest in the stocks of the companies. They have to consider a lot of factors and make decisions based on historical data and information and the key technicals of the companies. But if investors start looking at these key technicals for multiple companies and then compare them, it would take months to come to a decision. Meanwhile, the market is so rapid that it would change and disrupt in a blink of an eye. Thus, investors need a platform where they can compare the key technicals of companies to make decisions based on knowledge and high probability of profits. Our platform has got the investors covered when it comes to decision making. On our website i.e. Sarmaaya.pk, we have an option to compare stocks. If you go to compare stocks, you can select multiple companies from there and compare their key technicals and that would enable you to come to a final decision that would prove to be very beneficial. It requires no effort, saves a lot of time, and helps you in making a decision that would have a very high probability of earning profits.

Platform:

On our platform i.e Sarmaaya, you can simply go to compare stocks and select the companies you want to compare. After selecting the companies, you can compare their stocks on multiple parameters. In this article, we will go through all of these parameters one by one.

Stocks
Sector:

On top of the list, there is the sector. It is basically the sector in which a company operates. In the attached snapshot, the selected companies are from the sector of Technology and Communication.

Current Price:
Next in the list is the current price of the stock of a company. From this, one can simply see which company has more current price and compare the companies with each other based on their current prices. In the attached snapshot, the current price of Hum Network Limited is Rs.7.78 while the current price of the stocks of Systems Limited is Rs.554. This helps us in easily comparing the stocks of multiple companies.
To learn more about Share Price, go to: https://sarmaaya.pk/learn/article/1619431178

 

Volume:

Volume is basically the number of outstanding shares of a company. This also helps us in comparing the stocks of multiple companies.

P/E Ratio:

P/E ratio is the ratio of Price of the share to earnings per share. The lesser the value of P/E ratio, the better it is. Low value of P/E ratio means that the price of the stocks is low compared to the return that it provides. The higher value of P/E ratio represents the opposite scenario, it means that the price of the stock is high relative to the return that it provides. In the given snapshot, the P/E Ratio for Hum Networks Limited is -64.83 while it is 31.21 for Systems Limited. This means after comparing the P/E ratios of the two companies we can simply understand that the better choice to make is Hum Networks Limited.
To learn more about P/E ratio, go to: https://sarmaaya.pk/learn/article/1614597436

EPS:

EPS or Earnings Per Share is the monetary value of the earnings per outstanding share of a company’s common stock. If the EPS is too high then the stock might be overvalued and if it's too low then it might be undervalued. If the EPS is high then the investors will have to pay a higher price expecting a better return. Again, the EPS of Hum Network Limited is -0.12 while it is 17.75 for Systems Limited. This represents that the investors after comparing the EPS of the companies will be willing to pay a higher price for the shares because they will be expecting a better return based on a higher EPS value compared to low EPS value of -0.12 for Hum Network Limited.
To learn more about EPS, go to: https://sarmaaya.pk/learn/article/1614596750

Book Value:

It is the original historical value of any asset or stock which is basically an accounting value in the books of the company. This is also very helpful in comparing the stocks of the companies and how their values have changed over time. The initial value i.e book value of Worldcall Telecom Limited was 1.72 while it was 3.32 for Hum Network Limited. The higher the book value, the more worthy the stocks are thus, after comparison we realize that the stocks of Hum Network Limited are worth more than the stocks of Worldcall Telecom Limited.
To learn more about Book Value, go to: https://sarmaaya.pk/learn/article/1614593159

P/B Value:

It is the market’s valuation of a company relative to the book value. The investors use the P/B ratio to identify the potential investments. P/B ratios which are considered to be the solid investments are usually under 1. A company with a high P/B ratio has the stock that might be overvalued while the lower P/B ratio could mean the undervaluation of its stock. Worldcall Telecom Limited has a P/B ratio of 0.51 which means that the stocks of the company are undervalued but it could also mean that there is something fundamentally wrong with the company. And a higher P/B ratio of 3.89 for Hum Network Limited shows that the Stocks of the company are overvalued which makes it a less attractive investment.
To learn more about P/B value, go to: https://sarmaaya.pk/learn/article/1614597126

Dividend Yield:

Dividend Yield is the ratio that measures the quantum of cash dividends that is basically paid out to shareholders relative to market value per share. To calculate it you should divide the dividend per share by the market price per share and finally multiply it with 100. When the current yield of a stock is above its historical yield it might be undervalued. If it's beneath its historical yield then it might be overvalued. The higher the dividend yield, the better it is. Worldcall Telecom Limited, Hum Network Limited, and Media Times Limited have a dividend yield of 0 that means they do not pay the dividends while the dividend yield for Systems Limited is 0.74 which makes it an attractive investment.
To learn more about Dividend Yield, go to: https://sarmaaya.pk/learn/article/1614592539

Price to Sales Ratio:

The Price Sales Ratio is basically an investment valuation ratio. It is calculated by dividing a company's market capitalization by the company’s sales for the last year. It measures the value that the investors receive from a company’s stock. A higher than average P/S ratio could mean that the stocks are overvalued while a lower than average ratio might indicate undervaluation of a stock. Any value less than 1 for this ratio means that it is very favourable for the investors to invest while the interest of the investors would decrease with the increase in its value. Any value above 4 is not usually considered favourable. This means that Worldcall Telecom Limited is favourable while Systems Limited is not really favourable.
To learn more about Price to Sales ratio, go to: https://sarmaaya.pk/learn/article/1614334840

Equity to Asset (%):

It basically determines how much equity does the business or a company owns compared to the total assets. Thus, a high percentage of equity to asset makes it favourable to invest for an investor while a low percentage means it is less favourable. Thus, Systems Limited is the most favourable while the Media Times Limited is the least favourable.

Net Profit (%):

Net profit refers to the net income after all the other expenses like taxes have been paid. Higher the net profit more profitable it is for investors too. Thus, for obvious reasons, the best option after the comparison in the above 4 companies would be Systems Limited for the investors because of the high net profit (%) of 26.98.
To learn more about Net Profit, go to: https://sarmaaya.pk/learn/article/1614336474

Gross Profit (%):

Gross profit is the profit a company earns which is calculated by subtracting the total costs from the total revenue a company earns. For example, if you subtract the cost of goods sold from total revenue earned by a company, you get the gross profit. Tax and other expenses are still there in the gross profit of a company. So again, higher the gross profit of a company the more attractive it is for investors. Investors would be willing to pay more for the company with higher gross profit and in our example it is Worldcall Telecom Limited.
To learn more about Gross Profit, go to: https://sarmaaya.pk/learn/article/1614341257

Debt to Equity:

It is basically a measure of a company's financing. It helps in identifying the financing of a company via debt versus the funds that are wholly owned by the company. A company having a low debt to equity ratio would be considered good for the investment, since that company would not rely on the external debts. From our comparison, we can see that the best option is Media Network Limited has a negative debt to equity which is not a good option at all since it might represent a negative net worth as well. Thus, Systems Limited seems like a good option according to debt to equity.
To learn more about Debt to Equity, go to: https://sarmaaya.pk/learn/article/1614337664

Interest Coverage (Times):

It is a financial ratio that tells us about how many times a company can attempt to pay its interest on the outstanding debt that it has. It is calculated by dividing operating income by interest expense. It only tells us about the times a company can attempt to pay the interest it is not necessary that the firm succeeds. If the ratio is 10, it means we need $10 of operating income to pay $1 of the interest. If the ratio is low the company is fragile to either decrease in operating income or increase in interest expense. Thus, if it is high then it is probably a good indicator for the investors to invest. Thus, in our comparison above, Systems Limited with Interest Cover ratio of 42.81 is attractive.
To learn more about Interest Coverage ratio, go to: https://sarmaaya.pk/learn/article/1614340000

Cash Payout Ratio:

It is basically the payment that is paid to the common stockholders after the subtraction of preferred dividend payments. It helps in measuring the percentage of the company’s income which is paid in cash dividends. From the investor’s point of view the cash payout ratio ranging from 35%-55% is considered good. If a company is distributing almost half of its earnings as dividends, it represents that the company is a leader and very well established in its industry. Companies having the cash payout ratios of 95%-150% are considered weak since they are paying dividends which are more than what they earn. So in our comparison of the stocks of 4 companies, Systems Limited is clearly the best option with a cash dividend ratio of 19.72, but the rest of the companies do not even pay the dividends and for that reason they will not be attractive to the investors to invest in compared to Systems Limited.
To learn more about Payout ratio, go to: https://sarmaaya.pk/learn/article/1614594764

Current Ratio (Times):

This is basically the number of times a company would be able to pay its current liabilities/obligations with its current assets. A good current ratio is considered to be in the range of 1.2-2. A current ratio of 2 would suggest that a company has twice as many current assets than the liabilities to cover the debts. However, a current ratio which is less than 1 would mean that the company does not have enough liquid assets to be able to cover its short-term liabilities. In our comparison of 4 companies, Hum Network Limited with a current ratio of 2.85 and Systems Limited with a current ratio of 3.03 are definitely really good meanwhile the other two i.e. Worldcall Telecom Limited (0.30) and Media Times Limited (0.09) do not have enough liquid assets to cover their short-term liabilities.
Considering all of these factors explained above, one could simply make a knowledge-based decision without wasting time. But there is one factor to consider, you can select companies from different sectors, for example you could choose PSO (petroleum) on one hand and Jazz (Telecom) on the other and our platform would compare the two companies. But both of the companies are from very different sectors and would have many factors exclusive to their own category only. For example, a tech company would not require a lot of goods to be purchased compared to a company that relies on selling goods. Thus, it’s better to make a comparison between companies that belong to the same sector. You could compare companies from different sectors: however, that would not really give you the right decision, since the key technicals for both the companies would be different.

 

 

 




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