Investment Valuation information - what ARE all these figures and what do they mean?

Sea_Shell

Good Afternoon all.

I have a question.   Sorry if it's a rookie one.  Take the following funds factsheet...

Rathbone Global Opportunities Fund S Acc Portfolio Overview | GB00BH0P2M97 | Fidelity

What do all the figures under the "Valuation" heading actually mean or represent??

Price/Earnings
Price/Sales
Price/Book
Price/Cash Flow

Are high numbers good or bad?   Are they a percentage, if so what of?   

They are all higher than the benchmark...is this good?

The rest of the information seems fairly self explanatory, but I've never understood these figures.



(Which I should really, as we've got 6 figures with them!!!!! )

NSG666

Someone will be along to tell you whether they are any good or not but for an explanation of what they are just click on each of them and a pop up tells you.

Sorry if you have done that already and are wanting something different.

tebbins

These are ratios, they can be expressed as numbers like 15.3x or %, lower means the company is valued cheaply relative to its earnings/sales/cash flow/book value. Rathbone GO focuses on companies it considers high quality that attract higher valuations.

At the level of individual companies:

Price means price per share

Earnings means net profit or net income

Sales is pretty self explanatory

Book means book value, the number next to Net Assets on a balance sheet.
Cash flow can mean a few things (https://www.investopedia.com/terms/c/cashflow.asp).

At the level of a fund, these numbers are the average of all the figures for the fund's holdings, weighted according to the % of the fund each holding takes up.

https://www.investopedia.com/terms/p/price-earningsratio.asp
https://www.investopedia.com/terms/p/price-to-salesratio.asp
https://www.investopedia.com/terms/p/price-to-bookratio.asp
https://www.investopedia.com/terms/p/price-to-cash-flowratio.asp, may instead be https://www.investopedia.com/terms/p/pricetofreecashflow.asp

Sea_Shell

Well, I didn't realise about the pop ups, so thanks for that, but I still don't really understand what the information is telling me.

Eg. Is the Price/Earnings ratio of 37.18 a good thing or not?

Does it mean the fund price is overvalued or undervalued??

tebbins

The fund is a global large cap growth fund. Therefore, the valuation measures of the companies it holds will be higher than the average (given in green on the factsheet) because these companies are considered to have more future growth potential, or be better quality, than average. Whether you think paying £37.18 for every £1 of earnings reported in the past year is too high for those growth factors is a value judgement.
However, it is a globally diversified portfolio and even if we are overdue a growth crash, I don't think this fund would crash and burn like something more concentrated in very highly valued stocks such as SMT might. But that's just my opinion.

Sea_Shell

Thanks for all that information @tebbins ...the mists are clearing...a bit!

Like you say, it's a judgement call, if one were looking to buy more units.

Is the price too "frothy" or is it only that high because the markets are confident of the growth potential?

Hmmmm

PS what is the current Price/earnings ratio for that SMT fund, as the Fidelity factsheet doesn't seem to show it!?

coastline

Looking at the general picture the historical P/E ratio in the US is high at 21 . 

EZ_91bOXQAAp1Zo (1400×1169) (twimg.com)

The forward P/E is similar.

E82sCQnXsAgWkEO (900×653) (twimg.com)

As posted earlier Growth shares are normally valued higher than Value shares. So if you were to break down the SP 500 at P/E 21 the Growth forward P/E is currently 28 and Value forward P/E is 16. The fund mentioned at P/E 37 will be quoting a historic P/E and the documents won't be changed until all earnings are officially declared. There's a fair chance the forward P/E will be lower than this and possibly towards the markets Growth P/E of 28 I've seen posted on other websites. Hope that makes sense.

Stock Market Briefing: Selected P/E Ratios (yardeni.com)

Sea_Shell

I feel I've opened a can a worms!!!

But I have learned new stuff today, so thanks all.😎


One can then bogged down in the minutiae and suffer from analysis paralysis!! 😲🤯

Thrugelmir

Hence why managed multi asset portfolios are often recommended. Leave the important decisions to someone else. Easy to manage a portfolio in a bull market. Once the wind starts to change. Then not so easy. 

Sea_Shell

Thrugelmir said:

Hence why managed multi asset portfolios are often recommended. Leave the important decisions to someone else. Easy to manage a portfolio in a bull market. Once the wind starts to change. Then not so easy. 

We have one of those too.  It's P/E is at about 15.

We started the Rathbones with sold shares in an individual US company (DHs workplace sharesave) so still 100% equity, but with added diversity.

We've topped it up since.

We have £20k to invest, which doesn't change our equity % balance by much whichever fund we invest it in...a % here or there.

We have no plans to (have to) touch our ISAs for 10 years.

Sea_Shell

Just found this site that shows the P/E for the SMT fund as 2258!!!!!

Scottish Mortgage Invest... Company Financial Information (advfn.com)

Wow, is that right!?