Beginner's question on sharedealing

BountyBob

Hi all,

I'm new to sharedealing and so don't really understand the intricacies of how the market works.

In particular, I'm trying to work out whether my current company is a good investment prospect. 2 years ago the share price was around £2.70, now it's down to 22.5p because the company published some sales figures that fell short of projections. However, 22.5p gives the company a Market Capitalisation of £7.7m. Since the annual turnover is £20m+ it would seem to me that the city has severely undervalued the company. Would this be a correct assessment? And if so, would it seem like a good investment prospect?

Cheers in advance.

gozomark

what are the profits for the last few years , and whats expected this year and next ?
does it pay a dividend ?
how much debt does it have ?

BountyBob

Ah, all good questions, none of which I have an answer to. All I know is that the turnover has been around £20m for the last 4 years. Do you know of a good source I can look at to find that info?

dillydilly

the current share price is based on the collective knowledge and expertise of professional share traders dealing in millions. If you feel you have a better idea than them, or you have insider knowledge and are prepared to act illegally, then by all means trade.

as my dad used to advise me - "only experts and idiots buy used cars, and I ain't an expert..."

CLAPTON

The turnover of a company is a poor guide to its value... you could have a high turnover but it could be making a loss...c.f. Woolworths, RBS etc.

In general, profit is probably the single most important issue and the prospects of profit for the future.

tradetime

I'm not a fundy so I'm sure someone will correct me if I'm wrong here, but things that would be of use to you in assessing the investment potential of your company are Price to earnings, price to book, debt position, cash balance, cashflow and competition in the space in which it operates to name a few. I would not consider turnover to be a particularly important factor, except perhaps as a comparison with other companies in the space.

gozomark

actually price/sales can be quite a useful valuation measure, but only in association with other measures

BountyBob

Cheers for the responses all.

I'm too far down the food chain to have any insider knowledge and am a long way from being an expert (in fact, I'd be pushing my luck to call myself an amateur ). All I really see is that the company is doing no better or worse than it was 2 years ago yet it's lost over 90% of its share value. This was pre-market-meltdown; it's been that low since about May last year but I was skint back then.

I'll try and find out their profit over the last few years to get an idea if they're worth going for. Presumably their accounts are published and publically available. Any ideas where I should look for these?

Cheers

tradetime

If they have a website it is likely on there listed under investor relations or something like that, here's an example of a well known one.
http://www.bp.com/investorhome.do?categoryId=132&contentId=2004195

CLAPTON

If it offers shares to the public then it must by law publish an annual report
showing the balance sheet and the profit and loss (amount other things).
How do you know the share price?
If you said the company name I'm sure someone could find the relevant details

BountyBob

Hi Clapton.

The company is Ebiquity (formerly Thomson Intermedia).