After deciding to either purchase o...

After deciding to either purchase or "follow" a stock, an investor should make a commitment to regularly monitor its earnings for share ("EPS") progress. The Stock Tracking Guide (described in Chapter 8 of the Stock Selection Manual) provides a sensible approach for tracking a stock's progres The Stock Tracking Guide assists an investor in monitoring a stock's emotion between the 'Buy', 'Maybe' and 'Sell' bands defined by a Stock Selection Guide.

TRACKING RATIO

The principal calculation contained in a Stock Tracking Guide for a stock is its Tracking Ratio. This ratio is calculated on dividing a stock's recent P/E ratio by means of its average P/E ratio during the last five fiscal years.

The new P/E ratio is calculated on dividing the stock's recent price through its trailing four quarters of EP The average PIE during the last five fiscal years is available from Part 3 (Cell 7) of a recently-complet Stock Selection Guide for the stock.

A Tracking Ratio of les (more) than 10 indicates that the stock's new P/E ratio is low (high) in relation to historical prices paid for the company's EP

The Tracking Ratio for each Stock to cogitation during the past five years is contained in the table to the left The latest fiscal quarter (i.e. Q1 Q2 Q3 Q4) museed in computing the trailing four quarters of EP (used to calculate the newly come P/E ratio) is also reported.

EP are fully-diluted from continuing operations before items judg to be of a non-recurring nature. Where like non-recurring item(s) occur, estimates of quarterly and annual EP before the items(s) are generally cogitateed in the Tracking Ratio. EP data are used in the bills and notes; circulating medium (e.g. $C, $US) reported in the company's financial statements.

The price used in calculating a stock's late PIE ratio is the market price approximately 4-6 weeks prior to the magazine's publication date. Prices are taken from the stock's principal marketplace.

USING CFP

When a company's Cash be molten Per Share ("CFPS") was studiedinstead of EPS-the Tracking Ratio is calculated using P/CFP ratios-instead of P/E ratios.

It should be noted that corporations report quarterly financial data from about four weeks to a maximum of 60 days following the extremity of the fiscal quarter.

INSIDER TRADING DATA

Recent buying and selling activity by dint of insiders is also reported in the accompanying table.

The percentage of Insider Buyer is calculated as the number of buyer divided by way of the total number of insiders buying or selling the stock during the indicated period. no other than purchases or sales involving 500 or more shares are cast reproached in these data.

Frequently investors interpret insider buying as a favourable indicator of a company's long-term yet to be performance. Selling by insiders can appear for many reasons other than an unfavourable view of the company's long-term events to come prospects.

Copyright Canadian Shareowner Magazine Inc. Jan/Feb 1997

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