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 by means of 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 motion between the 'Buy', 'Maybe' and 'Sell' climes 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 by the agency of dividing a stock's recent P/E ratio on its average PIE ratio during the last five fiscal years.

The latter P/E ratio is calculated by way of dividing the stock's recent price by the agency of its trailing four quarters of EP The average P/E 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 fresh P/E ratio is low (high) in relation to historical prices paid for the company's EP

The Tracking Ratio for each Stock to studious mood during the past five years is contained in the table to the left The latest fiscal quarter (i.e. Q1 Q2 Q3 Q4) bring reproached in computing the trailing four quarters of EP (used to calculate the modern 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 meditateed 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 new 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 come 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 conclusion of the fiscal quarter.

INSIDER TRADING DATA

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

The percentage of Insider Buyer is calculated as the number of buyer divided by the agency of the total number of insiders buying or selling the stock during the indicated period. merely purchases or sales involving 500 or more shares are deliberateed in these data.

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

Copyright Canadian Shareowner Magazine Inc. Nov/Dec 1996

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