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What do you do when your research doesn't match?

Discussion in 'Investing Strategies' started by MoneyNotorious, 27th May, 2018.

  1. MoneyNotorious

    MoneyNotorious Member

    Joined:
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    One of the core topics that I have learned from Graham's 'Intelligent Investor', is simply DO YOUR OWN RESEARCH before investing. A value investing pillar we can all agree on.

    I have attempted my first ever stock hunt with the principles I have learned. The company that fit my own criteria - Coca Cola Amatil (CCL).

    My first baby step was the EPS. Since I started I've been using Investing.com and I see the EPS is listed as 0.6. But when I do my own calculation I get 0.42. It wasn't until a bit of further digging I realized my EPS was 'diluted', where as Investing.com was 'basic'. Therefore, my P/E Ratio resulted in 20.71 ($8.40 price/0.42) whilst every financial website seems to show the P/E at ~14.

    Next on my list was Debt/Equity ratio - this time I looked at CCL's annual report to get the facts myself. I see 'Total Liabilities - $4176.6m' and I calculated myself the 'Shareholders Equity - $1548.9' (and sure enough this number check out on their balance sheet) and solve for x.
    My result was 2.91. But when I look at Investing.com, I see 'Total Liabilities - $4508m' and a D/E Ratio of 1.51.

    Naturally, you start to doubt yourself by thinking how the hell these figures are being calculated and maybe you just suck at math. Of course, when evaluating a company, we can only estimate so much and its always an approximation, never a certainty. But for basics like P/E ratio or EPS, what do you do when your calculations don't match that being shown? Is it foolish to cross reference since you have no idea how their figures are calculated? Do you trust the online figures or do you prefer to DYOR?
     
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  2. twisted strategies

    twisted strategies Well-Known Member

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    the first issue you face , is the on-line data is not so current and annoyingly few tell you how current ( are they using full year report figures , half-yearly or quarterly figures) or are they using forecast ( guidance ) figures .

    i always lean towards the more conservative number ( if i get it wrong i prefer a happy surprise )

    according to Bell Direct ( supplied by Morningstar )
    VALUE Company
    Morningstar Earnings Model 1.36
    P/E Ratio 16.40
    P/B Ratio 4.07
    P/E Growth Ratio 3.55
    P/S Ratio 1.40
    INCOME Company
    Dividend Yield 5.3%
    Franking 75.0%
    Tax Adj. Dividend Yield 3.9%
    Dividend Stability 96.6%
    RISK Company
    Beta 0.92
    Current Ratio 1.52
    Quick Ratio 1.11
    Earnings Stability 58.30
    Debt/Equity Ratio 151.80
    Interest Coverage (x) 6.23

    ( i hold CCL )

    to my eyes it is currently over-priced but not ridiculously so

    i would be looking to add @ sub $8 as i see extra risk in the 'do gooders' and Greenies urgings for reform HOWEVER i do see Asian growth potential , so still find a reason to keep it on my top-up list .

    at some stage you have to go with your gut feelings BUT numbers like P/E , D/E , and EPS ( and others ) are very useful as a primary scanning parameter ... say trim your wish-list down to 5 to 10 stocks to put the heavy research into .

    do you really suck at math , or are the figures you are using rather rubbery and imprecise , ( the latter is often the case .. as many take-over predators find out later ( and they get a CLOSE LOOK at the accounts , before buying )
     
  3. MoneyNotorious

    MoneyNotorious Member

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    Ok so its clear I've done something wrong here. The figures I've used are from the financials but two very different results. If the figures are imprecise, how the hell do you know if they aren't?
     
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  4. twisted strategies

    twisted strategies Well-Known Member

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    if you call not having an inside view of the books ( whenever you feel like it ) wrong , then so be it

    of course ASIC would call that illegal ( insider trading ).

    what is happening is that you are not accurately informed , and many investment houses hire teams of analysts to best guess their figures ( because in theory , they do not know , for a fact , much more than you )

    now of course folks like Buffet ( and other big banks ) when lending a company billions ( often in preference shares ) get to put a microscope on the book-work .


    i suggest using the latest FULL results ( half-yearly or yearly ) and be conservative in your projections ( into the future ).

    did anyone mention the stock-market appears similar to a roulette wheel ???

    good work putting the time and practice in , but it only gives you a vague idea not certainty

    even your results are published weeks ( or months ) after the cut-off date . .. so they are already out-of-date