Sale on Shares!
Have you ever had your significant other tell you it’s not how much he/she spent it’s how much they save, save, save! Well I’m not going to tell you that you can’t afford not to buy. However, if a share goes on sale, and you happen to have some cash a share sale can be a good boost to your nest egg.
How do you know when there is a great stock sale versus the “Hey this sweater is half off of way over priced” kind of sale?
One tool you can use is the Price to Earnings (PE) or Price to Earnings Growth (PEG) for stable mature companies I tend to like a PE less than 8, and for nearly all companies I prefer a PEG less than 1.0.
Another tool I use is comparing the current long term CAGRagainst historical growth rates. Large mature companies tend not to make any changes that are so drastic that the long term growth rate should change significantly. Sort of a hybrid between fundamentals and reversion to the mean technical analysis.
A third method is to estimate the return of capital on the investment in the stock and discount it back to a present value using your form of a guaranteed risk free return.
When determining if there is a sale, shares need to be identified using multiple methods to avoid fake outs, accounting voodoo, or various other investing mishaps that can pop up.
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Related posts:
- Issued Shares – The Hidden Dividend or Stealing Money
- Float – Authorized – Outstanding Shares – Oh My!
- Stock Market 101 – Part 2
- How To Value A Stock
[...] you’ll notice a company has two types of shares available for purchase on the market that appear nearly identical in every way – often called class A stock [...]