Terminologies, Stock Pages of Business Newspapers Generally Contain
Any novice going through stock pages of a business newspaper (Business Standard, Economic Times, Financial Express or some other) is bound to get confused on seeing the kind of terminologies, abbreviations and formulae used there.
Here are some of the main terms, formulae and abbreviations which are used in stock pages of the business newspapers. The article will surely make you better familiar with these terminologies.
- P/E – They are arrived at after dividing the stock’s closing price of the day its reported EPS for trailing 12 months. EPS is calculated on the basis of consolidated earnings wherever possible.
The industry P/E is calculated by dividing the industry’s aggregate market capitalization by the aggregate standalone net profit of the industry from trailing 12 months excluding those companies which are making losses.
- M cap – Market capitalization is derived by multiplying the equity capital of the company with the closing price of its shares. The value changes as more shares are pumped in the market or price value changes.
- Book-value – Net worth of the company = equity capital + reserves & surplus – accumulated losses/ number of shares outstanding
- RoNW – Net profit/ net worth
- RoCE – PBDT/capital employed where capital employed is the net worth plus long term capital borrowing.
*Note – A business that enjoys high RoNW and RoCE value is considered capital efficient.
- Standard Deviation – SD measures the volatility of the stock over the market trend with respect to its returns.
- Alpha – Alpha is the extra return produced by a stock above the risk adjusted return from the market, when its level of risk is measured by beta. A positive alpha means that the stock of a particular company is performing better than the market.
- Beta – Beta is the measure of how much a stock moves with respect to a unit change in index. The negative beta implies that the stock moves against the market and vice versa.
- R Squared – The percentage by which the movement of a particular stock gets influenced by the market is termed as R Squared. It is the square of the coefficient of correlation between market and stock returns.
- Mean – average of daily returns of scrip in the last 30 trading days.
- Standard Deviation – sqrt ((( n* åy2)- ( å y * å y))/( n* n)
- Beta – (( n * å xy) – ( å x* å y))/( n* å x2 – ( å x * å x))
- Alpha– ( å y/ n) – ( Beta * ( å x/ n)) where n is 30 trading days, y is å( sum) of daily price returns of a stock for 30 trading days, x is å ( sum) of daily index returns.
When a significant change (that maybe equal to 3 per cent rise or fall in scrips whose market values are above 10 times paid- up value or 15 per cent for the rest of the shares) occurs in the day’s closing value compared with the previous close, the close price is underlined.
The letters H or L indicate a new high or low in the scrip.
The letters XD after the traded quotes indicate that the scrip has gone ex- dividend after that date, XB denotes ex- bonus, XR ex-rights, XO ex- indicator for other corporate actions like AGM/ EGM/ preference shares/ mergers and others and M denotes volume of shares in million, L in lakhs & K in thousands.