OK. Good. At USD12.8 = KES.1,100/share. Back to the topic of the day it appears then, "Price is what you pay, Value is what you get". Then the further question ought to be, what's the Value of buying at a certain Price?

Some key things to Consider About P/E

1. It is best to compare P/E ratios within a specific industry. This helps ensure the price-earnings performance is not simply a product of the stock's environment.

2. Be wary of stocks sporting high P/E ratios during an economic boom. The old saying that a "rising tide lifts all boats" definitely applies to stocks - even many bad ones - so it's wise to be suspicious of any upward price movement that isn't supported by some logical, underlying reason outside of the general economic climate.

3. Be equally dubious of stocks with low P/E ratios that appear to be waning in prestige or relevance. In recent years, investors have seen a number of formerly solid companies hit the skids. In these instances, it's foolish to think the price will magically increase to match the earnings and boost the stock's P/E ratio to a level consistent with the industry norm. It is far more likely that any P/E increase will be the direct result of eroding earnings, which isn't the P/E "bounce" bullish investors are looking for.

The Bottom Line
While investors are probably wise to be wary of P/E ratios, it is equally prudent to keep that apprehension in context. While P/E ratios are not the magical prognostic tool some once thought they were, they can still be valuable when used in the proper manner. Remember to compare P/E ratios within a single industry, and while a particularly high or low ratio may not spell disaster, it is a sign worth considering.


Sums it up the way I was thinking about it

[quote=Cde Monomotapa]As a btw, there is something peculiar about BAT Zim too. In 2009 it was at USD1.75, on Friday USD12.8. Up 255% YOY. What's up, not very sure... http://www.zimbabwe-stoc...com/listed-company/BAT/[/quote]

I have been following ZSE closely since March last year. It is this stock that attracted me to that market. I opened an account with a broker, they wanted $5k for the first single trade on a single counter, though I bargained to $3k. Since my bargain, was easily accepted I retreated and just followed the market online.
As for BAT Zim, if you look keenly, BAT is the largest leaf processor in Zimbabwe. Not forgetting that Zimbabwe is one of the world's largest tobacco leaf producers and exporters. The rest played in the market after the goo old comrade cooled down.

Critical ratios to lookout for when comparing stocks prices;

1. Price-Earnings Ratio (P/E):
This number tells you the worth of profits you’re paying for a stock and you calculate it by dividing earnings per share by the stock price. The lower the P/E the better. The most frequently used earnings number in the calculation is the total earnings per share over the past four reported quarters.

Benjamin Graham, the legendary investor and Warren Buffett’s teacher at Columbia University, postulated that stocks should trade for a P/E multiple equal to 8.5 times earnings plus two times the growth rate of earnings.

2. Price/Earnings Growth (PEG) Ratio:
The PEG ratio is another Benjamin Graham invention which attempts to measure the degree of a discount or premium you’re paying for growth. The calculation is to divide the P/E ratio by the long-term annualized percentage growth rate of earnings, ideally the next five years’ worth. A result of less than 1.0 implies that the market is not fully valuing the prospects for future growth.

The downside of the PEG ratio is that future growth rates are notoriously hard to predict. Companies’ growth profiles can change, sometimes drastically.

3. Price-to-Sales (P/S) : Similar to the P/E ratio, it divides stock price by total sales over the past year. Popularized by investment manager and longtime Forbes columnist, Ken Fisher, the price-sales ratio tells you how much you are paying for every coin in annual sales.

Because there are times when cyclical companies have no earnings, the price-sales multiple can be a better indicator of a company’s relative value than the P/E.

4. Price/Cash Flow (P/CF):
This useful measure of value is obtained by dividing the market value by operating cash flow. It strips out items like amortization and depreciation from earnings and focuses on cash generated by the business. This provides a better way than P/E for comparing valuations of companies from different countries that have different depreciation rules that can affect earnings.

Lower readings are preferable but keep in mind that there is more to cash flow than what comes from operations. Free cash flow is what’s left over after paying down debt, buying back stock and paying dividends. Negative free cash flow is forgivable as long it’s not a chronic problem, but companies that cannot produce positive cash flow from their core business operations can face eventual liquidity and solvency issues.

5. Price-To-Book Value (P/BV):
This ratio tells you how much you’re paying for the assets owned by the company, and you calculate it by dividing the market capitalization by the difference between total assets and total liabilities. The idea is to approximate how much money you could put your hands on if you shut down the business and sold off everything. As with most price multiple metrics, price-to-book is best used by comparing present multiples to historical averages.

6. Debt Equity Ratio

7. Return on Equity (ROE)
ROE measures a company’s efficiency at generating profits from money invested in the company, and it is derived by dividing by net income by shareholder’s equity.

8. Return on Asset (ROA)
Similar to return on equity, ROA is a measure of management effectiveness obtained by dividing net income by total assets. A company with a higher ROA is usually preferable to one with a lower ROA, since it shows the ability to grow profits more efficiently from a given base of assets.

9. Profit Margin
Profit margin shows how much a company earns from each coin of sales and is arrived at by dividing profit by sales. The number you get depends on the kind of profit you choose. Gross profit, which is sales minus cost of sales, is the simplest measure. Operating profit is gross profit less overhead items, and net profit (income) is what’s left after paying taxes.

10. Dividend Payout Ratio

11. Dividend Yield

Extracted from A Forbes.com Article by John Dobosz

@Metaspoilt, this is what your Hisah wrote in Dec 21, 2011....quote.."Correction - Institutional investors aka the big money mboiz - both foreign and local avoided this thing like a plague. You should do so too... Let them announce their carcass results then see if you can use the bones to boil some soup rally... As long as they duped wanjiku in an overly priced IPO, that says a lot about it as a firm. Also the use of the IPO proceeds to pay off some loan was a bad as any red flag gets. But at sub 4, you can buy some for a relief rally then sell at 6."
So I have nothing to hide and to say that on Britam/Britak and Centum, I actually on top