What UMushroom tells you about each stock
Welcome back to another knowledge nugget about stocks. Now you probably read our Blogpost about “What is a stock?” and wonder if that is everything you need to know to finally start. Well, not quite, but we are slowly getting there. This short article gives you an overview of the key parameters and communities’ views on a stock and what to expect from analysing a stock.
Why is this relevant?
Knowing the fundamentals of what you invest in is the first step to a successful investment journey. This may sound boring but making informed investment decisions reduces the risk of unpleasant surprises. Analysing the key parameters helps to make various company data within a sector comparable. It also provides you with indications about a company's success. You certainly don't want to buy a pig in a poke!
So, what can you expect from stocks?
First, you should know what type of stock you are dealing with. In the previously mentioned Blogpost, we gave you a brief introduction to the differences between common and preferred stocks as well as the different sectors. If you cannot remember it, don't worry. Click here to refresh the details. This implies that stocks go hand in hand with risk and return. Key parameters provide an overview of risk and return aspects of a given stock, set them about each other and make them measurable.
All of that probably sounds quite technical, hence why we provide you with some practical examples in the next paragraph. So, let's dive right into the different forms of parameters. We will take as an example LVMH: LVMH Moet Hennessy Louis Vuitton SE | UMushroom
A stock “in numbers” – crucial parameters to consider
Dividend & dividend yield
The dividend is probably the most crucial return parameter of a stock. Dividends are company profits that are distributed to shareholders. They are compensation for the risk shareholders take when investing in a company. Keep in mind that not all companies pay dividends.
Earnings per Share (EPS)
Earnings per share is a financial ratio that serves as an indicator of a company's profitability. EPS is calculated by dividing the company’s profit by the number of outstanding shares. In the example below, an EPS of 23.90 tells you that 1 share is “entitled” to 23.90 EUR of the company’s profit.
Price-Earnings Ratio (P/E)
The price-to-earnings (P/E) ratio is the ratio between a company's share price and earnings per share. If the share price is CHF 100 and earnings per share are CHF 10, this results in a P/E ratio of 10. A P/E ratio of 10 means that CHF 1 profit is valued at CHF 10 on the stock market.
Stock price performance
You should know that past performance may be helpful to understand particular dynamics of the stock price historically but should not be considered as an indicator for future performance.
Volatility
The key indicator of an asset's risk is volatility. Volatility describes how strongly an asset's price fluctuates. High volatility usually entails a higher risk for investors, as price developments are less predictable.
A stock through the eyes of our major communities
We provide the views of three major communities:
Our users
The professional press
Financial experts (bank analysts)
Community rating
We at UMushroom believe in the power of knowledge exchange within our community. This is why we added the community rating. See how other users rate a stock and what they think about it.
Professional Social Media Sentiment
Social Media Sentiment shows the perception of journalists, professional investors, financial bloggers etc. towards the company, the general sector and the entire index.
Research analyst views
Research analyst views show whether analysts recommend buying, holding or selling a stock. You can find the target price and the upside potential, which provide you with an expert-based outlook on the expected price development.
Key Take Away
Congrats, you survived another learning session! But what should you take away from all of this information? Analysing a stock helps you make better investment decisions. Key parameters provide you with specific information about a company’s success. Blended parameters show you the market’s expectations about the company and the sector in general.
Your time to shine
But enough with the theory for now. Ready to apply your knowledge? You can use our platform to search for your favourite companies and add them to the comparison. Compare their key parameters and check which one suits your expectations best!
