In my previous post, return on equity (ROE) was highlighted as an important indicator to measure the management performance of a company. But one of my readers pointed out that earning per share (EPS) is also useful for investors to determine the value of a stock. I totally concur with him and would like to emphasize that both are needed to evaluate the value of a stock.
Undeniably, valuing a stock is more difficult than assessing the financial health of a company because the former is a combination of art and science, while the latter can be found most of the time from the annual reports. In this article, I shall attempt to share with my readers how I value a stock, using the well-known OSIM as an example.
Firstly, P/E refers to the price earning ratio, It can be derived by dividing price-per-share over earning-per-share (EPS). For example, ......