[PloutosNX]

Hi,

I hope I'm not too late, but here is my little contribution regarding your request.

For me, there is already a contradiction between wanting to use ETFs and investing with low risk.
In any case, you will indirectly buy shares and company shares. There will therefore be declines and volatility.
There are several types of ETFs, general, sectoral, index replications, etc. and ETFs with physical products, others using synthetic products. You must first understand all these differences.
I am by no means an expert, I am also learning and trying to understand how to better protect myself by buying stocks individually.

Otherwise, as I understood, you are also in Switzerland. A simple way is to use your 3rd pillar to build it up and invest it. There is the FinTech VIAC (viac.ch) which allows you to use ETFs to make investments and if you make a payment every month you make what is called a programmed investment (DCA).

Also find out about taxation, what is taxable or not in order to best choose your investment products.

I hope I was also able to give you some additional information.
Xavier

[PloutosNX]

Good evening Jerome,

!!!ATTENTION!!! Since I can't edit my previous post.

The previous message has errors in the calculations, because YAHOO gives the values in thousands and I took them as tens!!! MSN gives them in millions by the way.

Price to book is OK with 0.9.

EPS with a value of 223 JPY is low, but it may be correct in my opinion.

EV I have a value of 6.8 billion, so almost half of the market CAP. How can I interpret this? Is the stock overvalued?

Price to Sales at 0.54, this is more correct and with a Sales per Share of 4585JPY.

Sorry for the wrong values above. I had searched on Yahoo where the coefficient was, but never found it, so I had deduced that it was "raw".

Good evening,
Xavier

[PloutosNX]

Hello Jerome,

We agree that the value of EPS will be very small (Otec 2019 EPS = 0.22) and that we must compare its percentage increase/decrease for each year?

I still have some basic interpretation problems with some results. The values are for the company Otec and the year 2019.

I have a factor of 100 difference for the Price to Book.
Price to book = Last Close / (Total stockholders' equity / Shares Outstanding) = 2465 / (14,108,354 / 5.2m) = 908 and I should have a value of 0.9 instead, right?
Do you see a big mistake?

How to calculate Earnings per share correctly?

Total stockholders' equity / Shares Outstanding
OR
(Net Income – Dividends) / Shares Outstanding

Because the dividend is so low compared to the value of the Net Income that I don't see the point in subtracting it. Should we use the dividend value multiplied by the number of shares?

We discussed Enterprise Value and how to calculate it, but the results obtained seem strange to me.

Here is a reminder EV=MC+Total Debt−C
MC: 12.8 billion JPY
Short term debt: 1039.8 million JPY
Long term debt: 36.99 million JPY
Cash: 7000.9 million JPY

EV = 12.8 billion JPY, so if we ignore the small variations (500 million), we have the same value as the MC. Does this mean that the company is correctly valued?

It would be better to use the latest values instead of the financial year ending March 2019?

One last question to make sure we don't make a big mistake when calculating the Price to Sales.
Price to Sales = Last Stock Price / (Total Revenue / Shares Outstanding), is this correct?

However for Otec, I get a value of 537.5, which seems wrong to me, do you have an explanation? (the Sales per Share I get 4.6)

Have a nice end of the day and happy holidays too.
Xavier

[PloutosNX]

Good evening Jerome,

Thank you for your reply.

OK for the EPS value (if it is Earnings Per Share) and it must be compared to Net Income available to common shareholders. Is this also the growth of results defined by B. Graham?

But if I only want to see the stability of profits (as advocated by B. Graham), what is the most correct value to use compared to those cited previously?
– Gross Profit / Gross Profit
– Operating Income or Loss
– Net profit / Net Income
– Net income available to common shareholders
– EBITDA

EBIT (EBIT: Earnings Before Interest and Taxes) can be calculated with "Net Income + Interest + Taxes", which corresponds to the value of "Income Before Tax + Interest Expense" at Yahoo I think, is my reasoning correct?

I'm trying to understand the basics, but unfortunately I haven't found any work that allows me to link these concepts to the names given in Yahoo/MSN's financial statements.

Good evening and thanks again for your help Jérôme,
Xavier

[PloutosNX]

Hello Jerome,

Sorry to ask for your help again, but I have a doubt about the following point.

When talking about profit (and stability or growth of results), what value should be used? I have not found any comments regarding our previous discussions.
I have these 5 possibilities in Income:

– Gross Profit / Gross Profit
– Operating Income or Loss
– Net profit / Net Income
– Net income available to common shareholders
– EBITDA

In my understanding, you have to use either the "Net Income available to common shareholders", because that is really what can be used for shareholders, or the EBITDA which represents the "health of the company".

Would you have a light to guide me?

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Thanks for the clarification and finally I understood this total income at Yahoo... another pear trying to pass itself off as an apple!

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Regarding the "short term debt" (or Notes payable), Yahoo does not seem to give this value. Do you have all this information on FT?

Both "Total Revenue" are at Yahoo. I tried to add images to this post to make it more visual, but there is no way.

These two values can be found at Yahoo (in English)

1) Financials->Income Statement->Breakdown->Total Revenue
2) Financials->Balance Sheet->Breakdown->Liabilities and stockholders' equity->Liabilities->Current Liabilities->Total Revenue

I hope you can still easily locate them.

I try to apply, but unfortunately since there is (almost?) nothing at a correct value, I prefer to continue digging and theorizing. If I had to limit myself to a few factual elements that I understand in a fundamental analysis, it risks tending towards 0…

I'll try to focus on what you wrote, find cheap titles.
What ratio do you recommend to start with? I would have said the PER, the current ratio and the payout ratio.
I haven't looked into FCF yet, but it can vary greatly from year to year. The main point is that it's always positive, or should it be compared to debt instead?

Which premium service do you recommend between FT, Yahoo, etc.? To echo your remark, what I really lack is practice. I have limited myself for the moment to ETFs and actively managed funds, until now I trust my entourage working for wealth management, but no one is eternal and I will no longer be able to have access to this type of fund. This is why I am really interested in understanding the subject in more detail and delving deeper in order to be able to manage my assets independently.

Thank you for all your advice and what you have already given me.

Good day,
Xavier

PS: I just have a remark, because I had read that you are not interested in cryptocurrencies and their spheres. Everyone sees the price and the speculative value, but can understand the technology and what it brings and the revolution that we can foresee (think of the Internet in the years 1995-2000).
I read that in the 2000s you were a fervent anti-GOLD "rebel" as well, but that since then you have watered down your wine and revised your judgment. Find out about the "tokenization" of assets (Security Token), imagine no longer being dependent on a bank to store your shares, but that you would be the sole master of your investments.

[PloutosNX]

Hello Jerome,

If I just interpret "short term debt" and according to investopedia, it is "current liabilities" in the balance sheet.

This brought to my attention something I still can't quite understand, so I'm mixing apples and pears...
This is regarding "Total Revenue", this term is given in two places, once in the "Balance Sheet" under "Liabilities and stockholders' equity -> Liabilities -> Current Liabilities" and in the "Income Statement".
I think I can understand the one in the results as turnover, but in the liabilities, I don't see what it corresponds to and I can't find an explanation, do you have a link, another reference (book) or a simple explanation?

Regarding the ratio, I didn't understand when you said that you have to take half if you use "total debt / total equity" and not "total liabilities / total equity". If I understand correctly, it would be "total liabilities / total equity <= 2" and "total debt / total equity <= 1" (or does the half correspond to 0.5?).
Sorry, this is math quibbling again and my teacher didn't have white hair... he was bald 😛 .

I read that you have to be careful depending on the sector you are analyzing. But I don't have that experience yet to know.

Enterprise value (EV) is not given on Yahoo and MSN, so I think you have to take the definition from investopedia

EV=MC+Total Debt−C

MC=Market capitalization: this is the number of shares in circulation multiplied by the current value of the share
Total debt = sum of “short-term” and “long-term debt”, can I take the same value of “current liabilities”?
C=Cash and cash equivalents; does this just correspond to "Total Cash" given in the "Balance Sheet" or is there a more explicit value to use?

It seems to me that the more I read, the more I ask you questions and the more I try to understand, the less sense all this makes... I suspect that it takes several years to succeed in understanding the subtleties, but I must admit that I think I am not attacking my approach from the right angle to learn how to invest in stocks directly and not follow a tracker.
If you also have any advice or comments regarding your experience, I'm all ears.

Good evening,
Xavier

[PloutosNX]

Hello Jerome,

I'm trying to make progress on my diagram and schema of value investing and growing dividends, but some of the details are still a little fuzzy.

I had read that a company should not have a maximum debt greater than twice its equity.

Max debt = 2*equity

But I have doubts about the understanding of maximum debt.
In your opinion, is it just long term debt or total liabilities or just long term liabilities (at Yahoo Total non-current liabilities)?

I also read that the light at the end of the tunnel of financial independence is getting brighter, I'm happy for you!

Good day,
Xavier

[PloutosNX]

Hello Jerome,

I need to better understand the differences between the values in the Balance Statement table and the Cash Flow table.

Regarding the calculations and playing on words, you are right. But how many errors due to a false interpretation result from it… I did not understand why you say that the “formula is wrong” and the result just to calculate the Free Cash Flow? (it is just this: Free Cash Flow = Cash Flow From Operating Activities + Investments in property, plant and equipment?)
Yahoo gives the value directly, that's right, but it's always better to understand what's behind it and also to be able to calculate it in case it is no longer given.

Ok regarding the number of shares (and this must be valid in all cases), we must always compare with the values of the year for which we make the calculations if I understand correctly. I just have a small problem when using average as we discussed previously. I will have to look into it, but this is detail and I am not as far in my research to be able to select good companies.

Have a nice end of the day,
Xavier

[PloutosNX]

Hello Jerome,

Free Cash Flow
I think that with an example it will be simpler and clearer.
Otec Corporation Company (1736.T) year 2019 – https://finance.yahoo.com/quote/1736.T/cash-flow?p=1736.T / https://finance.yahoo.com/quote/1736.T/balance-sheet?p=1736.T

I realize that my problem comes from two values with almost the same designation on Yahoo, but once in the Balance Sheet and in the second case in the Cash Flow… and also from the formula you give by subtracting capital expenditures. If I consider that an expense is negative in a balance sheet, I have to add it.

Cash Flow From Operating Activities: 1,170,002 JPY
Property, plant and equipment: 1,770,084 JPY (https://finance.yahoo.com/quote/1736.T/balance-sheet?p=1736.T)
Investments in property, plant and equipment: -133,673 JPY (https://finance.yahoo.com/quote/1736.T/cash-flow?p=1736.T)

This is what I would take to calculate FCF, is this correct?

Free Cash Flow = Cash Flow From Operating Activities + Investments in property, plant and equipment
1,170,002 + 133,673 = 1,036,329 JPY

Regarding the increase in the number of shares, is this a problem for the fundamental and long-term analysis of the Otec Corporation that you had done or are the 500 thousand new shares negligible (it is almost 10%)?

I will try to make a "diagram" to connect the different points to allow me to say whether or not an action would be interesting.

I will definitely get back to you for your opinion if you don't mind.

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Thank you for your reply.
I realize I mixed some sections between MSN - Yahoo and took the wrong values. Sorry for this!

I still have some points that make me doubt your remarks.

Free Cash Flow
FORMULA: free cash flow = operating cash flow – capital expenditure

Example for Otec Corp, the capital expenditure is negative, so I have to do a "standard" arithmetic operation (--=+) or is it always a subtraction equals whether the capital expenditure value is positive or negative?

We agree that "Total stockholders' equity" and "Total Equity" are synonyms?

I found in Yahoo the number of shares outstanding on the "Statistics" page (value 5.25M) and on MSN in "Summary" (value 5.7M). It is strange that in MSN under "Balance sheet" the value of "Ordinary Shares Outstanding" is different. Maybe there is a difference between previous years and the current one?

You mention EBITA, is that a typo I guess? Yahoo gives EBITDA (under Financial -> Income Statement) and MSN Operating Income (so EBIT if I understood correctly) under (Financials -> Income Statement). This allows you to have both values if needed.

Net income before extra items
You use FT (with a subscription) to get all this information, is that right?
But I think I can be satisfied for the moment with just the value of the Moderate Profit (average profit calculated with the "Net Income available to common shareholders" over the last 4-5 years)

Good day,
Xavier

[PloutosNX]

Hello Jerome,

But after rereading your response I have a few points to clarify before going into your comments further.

Free cash flow
You mention "Free Cash Flow", I was able to find a value on MSN, but Yahoo does not give it directly. One of your articles mentions "Operating Cash Flow minus Capital Expenditures". The total value of the Operating CFF is given at Yahoo as "Total Cash Flow From Operating Activities", but I can't figure out what capital expenditures this refers to.
I also noticed a big difference between MSN and Yahooo for the value of "Net income" (Yahoo – https://finance.yahoo.com/quote/1736.T/cash-flow?p=1736.T ) (MSN – https://www.msn.com/en-us/money/stockdetails/financials/tks-1736/fi-a9aslh ), do you have an opinion on this?

Price to book
It is the price / book value, so we are talking about the current price of the share or should we use the Market CAP? The book value I think is the value of the "Current Assets"?
Is the value given by Yahoo or MSN sufficient (it's the MRQ one, so the last quarter) or should we do a longer period, or an average or even per year and see its evolution?
I read in one of your articles that you prefer to use "tangible book value", what do you use as a value? I found on MSN the value "Net Property, Plant, and Equipment", but I think you also have to take into account inventory and other assets?

Price to tangible book
Here I have more difficulty finding the representation, but I think that we must use the value of Yahoo Intangible Assets. An additional question concerning the number of shares in circulation (Shares Outstanding), or do you take the value, because between Yhaoo and MSN there is a difference of almost 500 thousand! (Y:5.25Mio and MSN:5.7Mio)

EBIT / EBITDA
You mention these two abbreviations regarding Results Growth.
An EBITDA value is given at Yahoo, I think it is still the current value.
Could you tell me what method you use to calculate them? There is certainly a better way to do it than using the normal definition.
Do you only analyze the current or also the past or the average?

Net income before extra items
Yahoo and MSN don't give it directly? Do you get it elsewhere or is there an indirect way to calculate it?

My last question is about the dividend history at Yahoo, if I take the value given in "Historical data -> show dividends only", I have a value of 65 for the last of 2019 and if I look on the main summary page I have the value of 130 for the future, so this is already a forecast, but based on what?

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Thank you for your comments.

I will continue my research for the lexicon by integrating what you write on the site and supplementing it with your remarks above.

Happy Sunday,
Xavier

[PloutosNX]

Here is a glossary to start with to link the terms used in the book and their connection to Yahoo/MSN.
    
Turnover:
Are we talking about the total turnover for a year?
    Yahoo FR: Total turnover
    Yahoo EN: Total revenue
    MSN FR: Total income
    MSN EN: Total revenue

Current assets:
Is this the total current assets?
    Yahoo FR: Total current assets
    Yahoo EN: Total current assets
    MSN FR: Current assets
    MSN EN: Current assets

Current liabilities:
Is this also short term liabilities?
    Yahoo FR: Total current liabilities
    Yahoo EN: Total Current Liabilities
    MSN FR: Total current liabilities
    MSN EN: Total Current Liabilities

Current liabilities
Is this also short term liabilities?
    Yahoo FR: Total current liabilities
    Yahoo EN: Total Current Liabilities
    MSN FR: Total current liabilities
    MSN EN: Total Current Liabilities

Long term debt
    Yahoo FR: Long-term debt
    Yahoo EN: Long Term Debt
    MSN FR: Long-term debt
    MSN EN: Long Term Debt

Working capital requirement:
This is the difference between "Current Assets" and "Current Liabilities", is that right?

Equity:
Are these values correct or should we use "Capital Stock" - at MSN - and "Common Stock" at Yahoo?
    Yahoo FR: Total Equity
    Yahoo EN: Total stockholders' equity
    MSN FR: Total equity
    MSN EN: Total Equity

Profit stability:
A value that is difficult to obtain without subscribing to the various sites mentioned or is there another that would be usable for this?

Dividend statistics:
Same remark as before.

Growth of results:
Should we use turnover or operating profit/loss or some other value?
    Yahoo FR: *To be edited*
    Yahoo EN: *To be edited*
    MSN FR: *To be edited*
    MSN EN: *To be edited*

Course / Moderate Profit Ratio
This is our famous PER / PE Ratio? The different sites give us the TTM (value calculated on the average of the last 12 months). It should therefore be recalculated with the average profit, but to do this we use the "Net profit" (Net profit available to ordinary shareholders - (name according to Yahoo))?

This is it for this first approach. I will continue depending on the corrections made to this first research.

Sincerely,
Xavier

[Author]

Posts