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

The newly come P/E ratio is calculated by way of dividing the stock's recent price at 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 EPS

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 fresh P/E ratio) is also reported.

EP are fully-diluted from continuing operations before items judg to be of a non-recurring nature. Where of that kind nonrecurring 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 transmission from hand to hand (e.g. $C, $US) reported in the company's financial statements.

The price used in calculating a stock's new P/E 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 CFPS

When a company's Cash come Per Share ("CFPS") was studied--instead 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 extreme point of the fiscal quarter.

INSIDER TRADINC DATA

Recent buying and selling activity from insiders is also reported in the accompanying table.

The % of Insider Buyer is calculated as the number of buyer divided according to the total number of insiders buying or selling the stock during the indicated period. sole purchases or sales involving 500 or more shares are bring reproached in these data.

Frequently, investors interpret insider buying as a favourable indicator of a company's long-term coming time 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. May/Jun 1995

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