tables. These tables include complete reports on the previous day’s trading
on the NYSE and other leading exchanges. They can also give you a
surprising amount of extra information.
Some newspapers provide more extensive tables, some less. Since the
Wall Street Journal is available world wide, we’ll use it as a source of
convenient examples. You’ll find a prominent page headed “New York Stock
Exchange Composite Transactions”. This table covers the day’s trading for
all stocks listed on the NYSE. “Composite” means that it also includes
trades in those same stocks on certain other exchanges (Pacific, Midwest,
etc.) where the stocks are “dually listed”. Here are some sample entries:
|52 Weeks | | |Yld |P-E |Sales | | | |Net |
|High |Low |Stock |Div |% |Ratio|100s |High |Low |Close |Chg. |
|52 |37 5/8|Cons Ed |2.68 |5.4 |12 |909 |49 |48 7/8|49 1/4|+1/4 |
|7/8 | | | | | | |3/8 | | | |
|91 |66 1/2|Gen El |2.52 |2.8 |17 |11924 |91 |89 5/8|90 |-1 |
|1/8 | | | | | | |3/8 | | | |
|41 |26 1/4|Mobil |2.20 |5.4 |10 |15713 |41 |40 1/2|40 7/8|+5/8 |
|3/8 | | | | | | | | | | |
Some of the abbreviated company names in the listings can be a
considerable puzzle, but you will get used to them.
While some of the columns contain longer-term information about the
stocks and the companies, we'll look first at the columns that actually
report on the day's trading. Near the center of the table you will see a
column headed "Sales 100s". Stock trading generally takes place in units of
100 shares and is tabulated that way; the figures mean, for example, that
90,900 shares of Consolidated Edison, 1,192,400 shares of General Electric,
and 1,571,300 shares of Mobil traded on January 8. (Mobil actually was the
12th "most active" stock on the NYSE that day, meaning that it ranked 12th
in number of shares traded.)
The next three columns show the highest price for the day, the lowest,
and the last or "closing" price. The "Net Chg." (net change) column to the
far right shows how the closing price differed from the previous day's
close—in this case, January 7.
Prices are traditionally calibrated in eighths of a dollar. In case you
aren't familiar with the equivalents, they are:
1/8 =$.125
1/4=$.25
3/8 =$.375
1/2 =$.50
5/8 =$.625
3/4=$.75
7/8 =$.875
Con Edison traded on January 8 at a high of $49.375 per share and a low
of $48 875, it closed at $49.25, which was a gain of $0.25 from the day
before. General Electric closed down $1.00 per share at $90 00, but it
earned a "u" notation by trading during the day at $91 375, which was a new
high price for the stock during the most recent 52 weeks (a new low price
would have been denoted by a "d").
The two columns to the far left show the high and low prices recorded
in the latest 52 weeks, not including the latest day. (Note that the high
for General Electric is shown as 91 1/8, not 91 3/8.) You will note that
while neither Con Edison nor Mobil reached a new high on January 8, each
was near the top of its "price range" for the latest 52 weeks. (Individual
stock price charts, which are published by several financial services,
would show the price history of each stock in detail.)
The other three columns in the table give you information of use in
making judgments about stocks as investments. Just to the right of the
name, the "Div." (dividend) column shows the current annual dividend rate
on the stock — or, if there's no clear regular rate, then the actual
dividend total for the latest 12 months. The dividend rates shown here are
$2.68 annually for Con Edison, $2.52 for GE, and $2.20 for Mobil. (Most
companies that pay regular dividends pay them quarterly: it's actually
$0.67 quarterly for Con Edison, etc.) The "Yid." (Yield) column relates tie
annual dividend to the latest stock price. In the case of Con Edison, for
example, $2.68 (annual dividend)/$49.25 (stock price) ==5.4%, which
represents the current yield on the stock.
5.1 The Price-Earnings Ratio
Finally, we have the "P-E ratio", or price-earnings ratio, which
represents a key figure in judging the value of a stock. The price-earnings
ratio—also referred to as the "price-earnings multiple", or sometimes
simply as the "multiple"—is the ratio of the price of a stock to the
earnings per share behind the stock.
This concept is important. In simplest terms (and without taking
possible complicating factors into account), "earnings per share" of a
company are calculated by taking the company's net profits for the year,
and dividing by the number of shares outstanding. The result is, in a very
real sense, what each share earned in the business for the year — not to be
confused with the dividends that the company may or may not have paid out.
The board of directors of the company may decide to plow the earnings back
into the business, or to pay them out to shareholders as dividends, or
(more likely) a combination of both; but in any case, it is the earnings
that are usually considered as the key measure of the company's success and
the value of the stock.
The price-earnings ratio tells you a great deal about how investors
view a stock. Investors will bid a stock price up to a higher multiple if a
company's earnings are expected to grow rapidly in the future. The multiple
may look too high in relation to current earnings, but not in relation to
expected future earnings. On the other hand, if a company's future looks
uninteresting, and earnings are not expected to grow substantially, the
market price will decline to a point where the multiple is low.
Multiples also change with the broad cycles of the stock market, as
investors become willing to pay more or less for certain values and
potentials. Between 1966 and 1972, a period of enthusiasm and speculation,
the average multiple was usually 15 or higher. In the late 1970s, when
investors were generally cautious and skeptical, the average multiple was
below 10. However, note that these figures refer to average
multiples–whatever the average multiple is at any given time, the multiples
on individual stocks will range above and below it.
Now we can return to the table. The P-E ratio for each stock is based
on the latest price of the stock and on earnings for the latest reported 12
months. The multiples, as you can see, were 12 for Con Edison, 17 for GE,
and 10 for Mobil. In January 1987, the average multiple for all stocks was
very roughly around 15. Con Edison is viewed by investors as a relatively
good-quality utility company, but one that by the nature if its business
cannot grow much more rapidly that the economy as a whole. GE, on the other
hand, is generally given a premium rating as a company that is expected to
outpace the economy.
You can't buy a stock on the P-E ratio alone, but the ratio tells you
much that is useful. For stocks where no P-E ratio is shown, it often means
that the company showed a loss for the latest 12 months, and that no P-E
ratio can be calculated. Somewhere near the main NYSE table, you'll find a
few small tables that also relate to the day's NYSE-Composite trading.
There's the table showing the 15 stocks that traded the greatest number of
shares for the day (the "most active" list), a table of the stocks that
showed the greatest percentage of gains or declines (low-priced stocks
generally predominate here); and one showing stocks that made new price
highs or lows relative to the latest 52 weeks.
You'll find a large table of "American Stock Exchange Composite
Transactions", which does for stocks listed on the AMEX just what the NYSE-
Composite table does for NYSE-listed stocks. There are smaller tables
covering the Pacific Stock Exchange, Boston Exchange, and other regional
exchanges.
The tables showing over-the-counter stock trading are generally divided
into two or three sections. For the major over-the-counter stocks covered
by the NASDAQ quotation and reporting system, actual sales for the day are
reported and tabulated just as for stocks on the NYSE and AMEX. For less
active over-the-counter stocks, the paper lists only "bid" and "asked"
prices, as reported by dealers to the NASD.
It is worth becoming familiar with the daily table of prices of U.S.
Treasury and agency securities. The Treasury issues are shown not only in
terms of price, but in terms of the yield represented by the current price.
This is the simplest way to get a bird's-eye view of the current interest
rate situation—you can see at a glance the current rates on long-term
Treasury bonds, intermediate-term notes, and short-term bills.
Elsewhere in the paper you will also find a large table showing prices
of corporate bonds traded on the NYSE, and a small table of selected tax-
exempt bonds (traded OTC). But unless you have a specific interest in any
of these issues, the table of Treasury prices is the best way to follow the
bond market.
There are other tables listed. These are generally for more experienced
investors and those interested in taking higher risks. For example, there
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