How to identify a good counter?

peacockman wrote:

How to identify a good counter?

While there are many companies in a similar field, we have to identify which is more suitable to buy and which may be rise up soon.

Here are some ideas to choose a good counter:-

1. Choose one or more comparative companies.

2. Learn about the sector, and how the business and strategy of the company compares with others in the sector. From this you can form a view as to the prospects and downside risks for the company.

3. Compare the basic valuation measures: prospective (or historic) PE, dividend yield, PEG ratio etc. This is a good time to look at analysts' recommendations.

4. If the basic valuation measures do not make sense, then look at other valuation measures such as price/sales or price/book value.

5. Look at how the share price has performed over the past twelve months (or longer).

6. Examine and compare the operating performance: revenues, margins, return on capital etc.

7. Examine and compare the financial strength: gearing, dividend cover, cash flow, tangible assets etc.

8. Look for any hidden liabilities or value, e.g. pension fund deficits, over- or under-valued properties.

A Comparison Table

Drawing up a table such as the one below is a quick and easy process which helps focus attention on what may be driving the market's valuation of a share:


All of the numbers can be taken from the CSE Company Financial Info, with just a little bit of arithmetic required for the revenue growth and cash flow ratios.
Edited article of Tony Reading from www.fool.co.uk

peacockman wrote:

How to identify a good counter?

While there are many companies in a similar field, we have to identify which is more suitable to buy and which may be rise up soon.

Here are some ideas to choose a good counter:-

1. Choose one or more comparative companies.

2. Learn about the sector, and how the business and strategy of the company compares with others in the sector. From this you can form a view as to the prospects and downside risks for the company.

3. Compare the basic valuation measures: prospective (or historic) PE, dividend yield, PEG ratio etc. This is a good time to look at analysts' recommendations.

4. If the basic valuation measures do not make sense, then look at other valuation measures such as price/sales or price/book value.

5. Look at how the share price has performed over the past twelve months (or longer).

6. Examine and compare the operating performance: revenues, margins, return on capital etc.

7. Examine and compare the financial strength: gearing, dividend cover, cash flow, tangible assets etc.

8. Look for any hidden liabilities or value, e.g. pension fund deficits, over- or under-valued properties.

A Comparison Table

Drawing up a table such as the one below is a quick and easy process which helps focus attention on what may be driving the market's valuation of a share:


All of the numbers can be taken from the CSE Company Financial Info, with just a little bit of arithmetic required for the revenue growth and cash flow ratios.
Edited article of Tony Reading from www.fool.co.uk

Teller wrote:Will it work for CSE? :-), Lot of investors are following the crowd not the fundementals.