Good morning dear author of the video. I am a novice in the field of investment. I am a foreigner. Thank you very much for your very well explained video with visual examples. Difficult notions are explained in articulate English language that even a foreigner may understand. I am looking forward to watch your videos. Have a nice day.
Thank you very much for the kind words! Happy to hear that you enjoy watching the videos! On average I publish one new video per week, and the existing list of videos is around 130 videos long, so that should give you quite a bit of material to go through. ;-) Enjoy!
As usual another excellent explanation .. At the end of the video you said that you do not use this figure as one of your main ones. May I ask which ones? Thanks in advance
Good catch! 🙂 I try to look at the potential convexity of a stock: are there any indicators that the stock is ready for take-off? See also my video on how to build an investment portfolio: ruclips.net/video/K4mWd2zBYVk/видео.html
A high price to book ratio can also indicate that the company is in a relatively low capital-intensive sector. Apple outsources its manufacturing and charges a high premium for its innovative products. Extraordinary cash-cow businesses like Apple Computer often have a high price to book ratio for this reason.
Excellent point! Thank you. Have a look at Apple's FY22 balance sheet: ruclips.net/video/J_1F8GoLOI8/видео.html Apple’s Shareholders’ equity on the balance sheet has eroded from $134B at year-end FY17 (of which $98B retained earnings) to $50.7B at year-end FY22 (of which ($3B) retained earnings), as the company year after year after year has stock purchases plus dividends exceed net income!!!
Hello there! Thank you so much for your insightful and interesting basic finance videos. Could you please make a video explaining how you basically compare different companies overall? I feel a bit confused as there are financial ratios, market cap, and other stuff that complicate things. What should we look at exactly?
Yes, you can compare many different things, and they may or may not generate interesting datapoints. There is not a single metric that captures everything. Each company might have unique things going on in their financial statements that are unlike others. My favorite things to start with in a financial comparison between companies are organic revenue growth, margins (gross and operating), free cash flow, balance sheet composition, and fragility. See my video on financial analysis ruclips.net/video/jG-oXx54qxE/видео.html and any of my finance case studies ruclips.net/video/ya7rRZJCLEc/видео.html&pp=gAQBiAQB
@@TheFinanceStoryteller Thank you for the response! I'll check the videos you've shared so I can gain further insights and perhaps have a better understanding regarding my question. Keep it up! Your videos are amazing.
Thank you for the suggestion, Dinesh! I don't have video on face value yet, will add it to my list of possible topics for new videos. Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate.
@@dineshkumar-vc6qk Two approaches to that: look up the latest traded price of the stock on the market, or try to model it using concepts like discounted cash flow and WACC ruclips.net/video/1O-DbtVueMw/видео.html
@@TheFinanceStoryteller yes its pretty crazy how high it got, but would you say it makes sense that apple is trading at 400 dollars per share. I"m taking in consideration that a pandemic is still at large, and the actual FED stimulus package over the recent months has made significant price changes on the overall market. Also, what are your thoughts on Tesla right now in a unbiased analysis?
@@dolevmazker736 I don't own shares in either of these companies, and I am not planning to take any positions (long or short) in either of them. I wish (with the benefit of hindsight) that I had bought shares in Tesla at $500 earlier this year, as they are now trading at $1500. I underestimated the upside potential. I was not overly impressed with Apple's Q1 earnings (see the comments I made in the webinar ruclips.net/video/r3j3Eg4CuSY/видео.html ), and am interested to see how they did in Q2. On Tesla: they will have to execute very well operationally to justify the current valuation.
Thank you! Great to hear that. I think the related video on market capitalization may also be useful for you to watch: ruclips.net/video/k-Rp32j0uj8/видео.html
How important is the book value and all those ratios if you're investing just for capital growth and not so much for income (dividend payouts etc)? Supposedly your to-be-realised capital gain is just selling the stock after its market value has risen- which is pretty much influenced by market sentiment?
The way I look at it: market value versus book value provides a datapoint. Not necessarily a "decision point" (as in: if the ratio is above or below x, then take action y), but a "nice to know". In the context of financial services, market to book value can be interesting if you compare the market value to the net asset value (why would those differ?). In mature conglomerates, when the market value drops below the book value, then investors fear that there might be bad news (write-offs, impairments) that have not been announced yet (and therefore not reflected in the book value). In most other cases, in today's asset-inflated world, market value is far higher than book value.
So if net asset of A company per share is 25 and market value is 150 and B company’s net asset per share is 25 and market value is 20 so which share should I buy?
That depends on your assessment of the company's future growth potential... Maybe the PEG ratio can help you decide: ruclips.net/video/9jE4EaAXNQA/видео.html
Good question! I have mixed feelings about using those terms as synonyms, even though carrying amount and book value, as well as market value and fair value essentially are describing the same things. Somehow, I relate "Carrying Amount" and "Fair Value" to line items on the assets side of the balance sheet, rather than to equity. For example, "carrying value of the inventory" would be a term I would use, or "fair value of the mortgage portfolio on the assets side of a bank's balance sheet".
It depends. There is an excellent document available online by PWC on similarities and differences between US GAAP and IFRS. An important point I learned from it is that under US GAAP, the legal form of the financial asset drives classification.
Hi Muhammad! Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. Par value is more commonly used with bonds than with stocks.
Hi Nelly! Download the annual report (sometimes called 10-K filing) of a company, and check either item 6 "Selected Financial Data" or item 8 "Financial Statements and Supplementary Data", more specifically the income statement (sometimes called "consolidated statement of operations"). The number of outstanding shares is in the line "Shares used in computing earnings per share".
Yes, the investor relations sections of the websites of major corporations like 3M, Alphabet Inc (Google), Apple, Facebook and Microsoft are a great source of information for me when I do my research. You can find the same information on the SEC filings website as well. Here's a video on how to read annual reports in general ruclips.net/video/Kw-1nopchnA/видео.html and more specifically the MD&A section which tends to have a lot of interesting narrative and numbers on how a company is performing operationally ruclips.net/video/LD6YBBtpEcs/видео.html
Let's put those questions into context. I assume you are talking about companies that do a secondary offering of their stock, and place this directly with institutional investors. For example, a biotech or software company that is already listed on a stock exchange could place more shares (increasing both cash and equity on their balance sheet), but the company doesn't want the effort/cost/timespend of going through an extensive round of roadshows and investor meetings like they did at the time of their IPO. Offering new shares at a discount to the market value could be a win-win for both the issuing company, as well as the investors taking on this large number of extra shares (and probably promising to hold on to them for a certain period of time). In my opinion, this is (in most cases) not an indication of the share price increasing or decreasing, assuming you find the "special deal" fairly valued (i.e. appropriate discount for the number of shares placed). If a company is so desperate to raise cash, that they offer new shares at an outrageous discount, then I would be cautious.
Watch the 5 minutes video, and you will know. It even has chapters for easier navigation, so you can jump straight away to those sections that are of interest to you.
@@frankjones1442 If you are asking whether I have a Facebook account: yes, but purely for private purposes (non-business). If you are asking whether I own shares in Facebook: no. If you want to connect, then Linked In, Twitter and Instagram are my business accounts.
if the boardroom guys make decisions going forward to even sell their pooled shares based on whats recorded and proven like debt and remaining inventory i think thats the best indicator of a companies health compared to a shouting bell guy on basic cable tv news stock speculation which just serves as sponsored p.r. announcements reacting all crazy to market prices which spring back to normal like 3 days later
Heb je toevallig ook een idee wat 'Surplus' inhoud? In Security Analysis heeft hij het daar heel vaak over, maar het wordt me niet echt duidelijk wat dat is.
@@momenttom4969 Goedemorgen Tom! Wie is "hij"? Het eerste wat me te binnen schiet (in boekhoudtermen) bij het woord "surplus" is "capital in excess of par value". Als je als bedrijf aandelen uitgeeft tegen $10 (marktwaarde, of met een kleine korting erop), terwijl de aandelen een nominale waarde hebben van $1, dan boek je $1 per aandeel in account capital stock, and $9 per aandeel in "capital in excess of par value", met uiteraard de debet van de boeking in cash.
@@TheFinanceStoryteller Dank voor het snelle antwoord! Benjamin Graham is de schrijver daarvan. Ik denk niet dat de uitleg past bij hoe hij het bedoeld. Mocht je nieuwsgierig zijn, dit is de downloadlink van het boek en op pagina 413 staat de uitleg (die ik niet snap); index-of.co.uk/Hacking-Coleccion/Graham%20&%20Dodd%20-%20Security%20Analysis%20(6th%20ed).pdf
Good morning dear author of the video. I am a novice in the field of investment. I am a foreigner. Thank you very much for your very well explained video with visual examples. Difficult notions are explained in articulate English language that even a foreigner may understand. I am looking forward to watch your videos. Have a nice day.
Thank you very much for the kind words! Happy to hear that you enjoy watching the videos! On average I publish one new video per week, and the existing list of videos is around 130 videos long, so that should give you quite a bit of material to go through. ;-) Enjoy!
Great video. I love how easy you explain things.
Thank you very much for the compliment! Good to hear you enjoy it. Please spread the word! :-)
Thank you! I have a test in 40 minutes and you explained it so simply!
You're welcome! Hope your test went well!!!
STRAIGHT FORWARD EXPLATION. THANK YOU
Thank you for watching and commenting, Ellen! 😊
As usual another excellent explanation ..
At the end of the video you said that you do not use this figure as one of your main ones.
May I ask which ones?
Thanks in advance
Good catch! 🙂 I try to look at the potential convexity of a stock: are there any indicators that the stock is ready for take-off? See also my video on how to build an investment portfolio: ruclips.net/video/K4mWd2zBYVk/видео.html
@@TheFinanceStoryteller I will now watch the link you sent me, thanks so much for the quick reply
@@Erez.Levi.Stocks You're welcome, my friend!
A high price to book ratio can also indicate that the company is in a relatively low capital-intensive sector. Apple outsources its manufacturing and charges a high premium for its innovative products. Extraordinary cash-cow businesses like Apple Computer often have a high price to book ratio for this reason.
Excellent point! Thank you. Have a look at Apple's FY22 balance sheet: ruclips.net/video/J_1F8GoLOI8/видео.html Apple’s Shareholders’ equity on the balance sheet has eroded from $134B at year-end FY17 (of which $98B retained earnings) to $50.7B at year-end FY22 (of which ($3B) retained earnings), as the company year after year after year has stock purchases plus dividends exceed net income!!!
Hello there! Thank you so much for your insightful and interesting basic finance videos. Could you please make a video explaining how you basically compare different companies overall?
I feel a bit confused as there are financial ratios, market cap, and other stuff that complicate things. What should we look at exactly?
Yes, you can compare many different things, and they may or may not generate interesting datapoints. There is not a single metric that captures everything. Each company might have unique things going on in their financial statements that are unlike others. My favorite things to start with in a financial comparison between companies are organic revenue growth, margins (gross and operating), free cash flow, balance sheet composition, and fragility. See my video on financial analysis ruclips.net/video/jG-oXx54qxE/видео.html and any of my finance case studies ruclips.net/video/ya7rRZJCLEc/видео.html&pp=gAQBiAQB
@@TheFinanceStoryteller Thank you for the response! I'll check the videos you've shared so I can gain further insights and perhaps have a better understanding regarding my question. Keep it up! Your videos are amazing.
Happy to help! Please spread the message to friends and colleagues.
Very well.. how to calculate market value and face value? You have any video this
Thank you for the suggestion, Dinesh! I don't have video on face value yet, will add it to my list of possible topics for new videos. Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate.
@@TheFinanceStoryteller thanks for your reply... How to calculate market value?
@@dineshkumar-vc6qk Two approaches to that: look up the latest traded price of the stock on the market, or try to model it using concepts like discounted cash flow and WACC ruclips.net/video/1O-DbtVueMw/видео.html
@@TheFinanceStoryteller thanks a lot . I will watch
well explained man, i enjoyed this video
Glad you enjoyed it! A lot has happened to the Apple share price since then, it's now nearly at $400!
@@TheFinanceStoryteller yes its pretty crazy how high it got, but would you say it makes sense that apple is trading at 400 dollars per share.
I"m taking in consideration that a pandemic is still at large, and the actual FED stimulus package over the recent months has made significant price changes on the overall market.
Also, what are your thoughts on Tesla right now in a unbiased analysis?
@@dolevmazker736 I don't own shares in either of these companies, and I am not planning to take any positions (long or short) in either of them. I wish (with the benefit of hindsight) that I had bought shares in Tesla at $500 earlier this year, as they are now trading at $1500. I underestimated the upside potential. I was not overly impressed with Apple's Q1 earnings (see the comments I made in the webinar ruclips.net/video/r3j3Eg4CuSY/видео.html ), and am interested to see how they did in Q2. On Tesla: they will have to execute very well operationally to justify the current valuation.
@@TheFinanceStoryteller
Thanks for the reply.
I will look up your video and try to understand the webinar
Damn. Thanks for taking your time by making a PP, using clear examples and explaining the topic very well!!! +1 sub and like
Thank you for watching! Happy to hear you enjoyed it. Please spread the word to friends and colleagues! ;-)
Great video. Learn a lot
Thank you! Great to hear that. I think the related video on market capitalization may also be useful for you to watch: ruclips.net/video/k-Rp32j0uj8/видео.html
@@TheFinanceStoryteller thank you. I'll watch it for sure
How important is the book value and all those ratios if you're investing just for capital growth and not so much for income (dividend payouts etc)? Supposedly your to-be-realised capital gain is just selling the stock after its market value has risen- which is pretty much influenced by market sentiment?
The way I look at it: market value versus book value provides a datapoint. Not necessarily a "decision point" (as in: if the ratio is above or below x, then take action y), but a "nice to know". In the context of financial services, market to book value can be interesting if you compare the market value to the net asset value (why would those differ?). In mature conglomerates, when the market value drops below the book value, then investors fear that there might be bad news (write-offs, impairments) that have not been announced yet (and therefore not reflected in the book value). In most other cases, in today's asset-inflated world, market value is far higher than book value.
So if net asset of A company per share is 25 and market value is 150 and B company’s net asset per share is 25 and market value is 20 so which share should I buy?
That depends on your assessment of the company's future growth potential... Maybe the PEG ratio can help you decide: ruclips.net/video/9jE4EaAXNQA/видео.html
Thanks for the video.
Just to confirm... can these terms be replaced with “Carrying Amount” and “Fair Value”?
Good question! I have mixed feelings about using those terms as synonyms, even though carrying amount and book value, as well as market value and fair value essentially are describing the same things. Somehow, I relate "Carrying Amount" and "Fair Value" to line items on the assets side of the balance sheet, rather than to equity. For example, "carrying value of the inventory" would be a term I would use, or "fair value of the mortgage portfolio on the assets side of a bank's balance sheet".
Great video👍🏽
Can I ask if the Shareholder represents the market value?
Close. Share price represents the market value of a stock. See my video on market capitalization: ruclips.net/video/k-Rp32j0uj8/видео.html
Thank you for video
You're welcome! :-)
Thanks sirji
is it necessary to record the cost or the fair market value?
It depends. There is an excellent document available online by PWC on similarities and differences between US GAAP and IFRS. An important point I learned from it is that under US GAAP, the legal form of the financial asset drives classification.
whats the differance between Price to book ratio and Book value per share ?
If the share price is $10 and the book value per share is $5, then the price to book value is 2.
@@TheFinanceStoryteller thanks boss 🙏
What about nominal/par value? Whats that?
Hi Muhammad! Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. Par value is more commonly used with bonds than with stocks.
@@TheFinanceStoryteller Thank You so much for updating Sir! Undersood 👍
@@rehan-hq2ec Happy to help!
Where did you get outstanding shares from please?
Hi Nelly! Download the annual report (sometimes called 10-K filing) of a company, and check either item 6 "Selected Financial Data" or item 8 "Financial Statements and Supplementary Data", more specifically the income statement (sometimes called "consolidated statement of operations"). The number of outstanding shares is in the line "Shares used in computing earnings per share".
The Finance Storyteller ohh so you looked it up online?
Yes, the investor relations sections of the websites of major corporations like 3M, Alphabet Inc (Google), Apple, Facebook and Microsoft are a great source of information for me when I do my research. You can find the same information on the SEC filings website as well. Here's a video on how to read annual reports in general ruclips.net/video/Kw-1nopchnA/видео.html and more specifically the MD&A section which tends to have a lot of interesting narrative and numbers on how a company is performing operationally ruclips.net/video/LD6YBBtpEcs/видео.html
The Finance Storyteller thank you. Great video
You're welcome! Please spread the word to friends and colleagues. :-)
book value or eps which to choose?
Depends on what you are trying to analyze!
Is Book Value the same as Enterprise Value?
Nope. Enterprise Value is related to Market Value, see my video explaining WACC ruclips.net/video/1O-DbtVueMw/видео.html
What does it mean when a company sells their own shares lower than the market value? Will the price of a share increase or decrease?
Let's put those questions into context. I assume you are talking about companies that do a secondary offering of their stock, and place this directly with institutional investors. For example, a biotech or software company that is already listed on a stock exchange could place more shares (increasing both cash and equity on their balance sheet), but the company doesn't want the effort/cost/timespend of going through an extensive round of roadshows and investor meetings like they did at the time of their IPO. Offering new shares at a discount to the market value could be a win-win for both the issuing company, as well as the investors taking on this large number of extra shares (and probably promising to hold on to them for a certain period of time). In my opinion, this is (in most cases) not an indication of the share price increasing or decreasing, assuming you find the "special deal" fairly valued (i.e. appropriate discount for the number of shares placed). If a company is so desperate to raise cash, that they offer new shares at an outrageous discount, then I would be cautious.
Time will tell !
Hindsight bias will tell! ;-)
drinking game idea: you take a shot everytime he says "time will tell".
😂😂😂 I think I will join you, and we can put the video on a repeat loop.
@@TheFinanceStoryteller appreciate the content man, just got a full score on my test
Well done!!!! 😊
What is the difference?
Watch the 5 minutes video, and you will know. It even has chapters for easier navigation, so you can jump straight away to those sections that are of interest to you.
@@TheFinanceStoryteller do you have facebook?
@@frankjones1442 If you are asking whether I have a Facebook account: yes, but purely for private purposes (non-business). If you are asking whether I own shares in Facebook: no.
If you want to connect, then Linked In, Twitter and Instagram are my business accounts.
You sound like Nikki Lauda in the movie rush. Great video btw.
Thank you! As a Formula 1 fan, I consider that a compliment. ;-)
Book value weight is more relevant or market value?
Either one, or both, can be relevant, depending on what you are trying to analyze.
If we want to buy share should we emphasis more on market value compare to bv?
@@soujanyatuladhar2297 See my video on the price-earnings ratio: ruclips.net/video/XvHAlui-Bno/видео.html
if the boardroom guys make decisions going forward to even sell their pooled shares based on whats recorded and proven like debt and remaining inventory i think thats the best indicator of a companies health compared to a shouting bell guy on basic cable tv news stock speculation which just serves as sponsored p.r. announcements reacting all crazy to market prices which spring back to normal like 3 days later
Agree, Dean! I don't watch the shouting bell guy. Fabricated narrative to fill time in between commercials. ;-)
Português de Portugal?
Holandês da Holanda
Enjoyed this video? Then please subscribe to my channel, and watch the video on market capitalization next: ruclips.net/video/k-Rp32j0uj8/видео.html
@CPA ONDARISE Thanks for the compliment! :-)
time will tell
Yes! :-) Being able to calculate the price-to-book ratio does not necessarily imply it is a meaningful metric.
Are you Dutch? :P
Yes! Good guess. ;-)
dat dacht ik ook!
好
Take
Lekker Nederlands accentje
Yep! Was het goed te volgen?
@@TheFinanceStoryteller jazeker!
Heb je toevallig ook een idee wat 'Surplus' inhoud? In Security Analysis heeft hij het daar heel vaak over, maar het wordt me niet echt duidelijk wat dat is.
@@momenttom4969 Goedemorgen Tom! Wie is "hij"? Het eerste wat me te binnen schiet (in boekhoudtermen) bij het woord "surplus" is "capital in excess of par value". Als je als bedrijf aandelen uitgeeft tegen $10 (marktwaarde, of met een kleine korting erop), terwijl de aandelen een nominale waarde hebben van $1, dan boek je $1 per aandeel in account capital stock, and $9 per aandeel in "capital in excess of par value", met uiteraard de debet van de boeking in cash.
@@TheFinanceStoryteller Dank voor het snelle antwoord! Benjamin Graham is de schrijver daarvan. Ik denk niet dat de uitleg past bij hoe hij het bedoeld. Mocht je nieuwsgierig zijn, dit is de downloadlink van het boek en op pagina 413 staat de uitleg (die ik niet snap); index-of.co.uk/Hacking-Coleccion/Graham%20&%20Dodd%20-%20Security%20Analysis%20(6th%20ed).pdf