This page will contain answers to commonly asked questions handled by our support staff, along with some tips and tricks that we find useful and will present here as questions.

1. How To
2. Info
3. Problem
4. Where to Find
5. General

How do I view a company's proformas?
Simply open the default company analysis. If any proforma's exist within the past five years, they will automatically be included. Alternatively, create a new Company Analysis. In the Results Criteria pane manually select (highlight) the proformas you wish to view. Select Ok.

How do I find all the companies in which a particular individual is a director?
Under the Tools menu, select Find... Enter the individuals name and then select Directors from the Look In drop-down list. Click Find Now.

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What does 'Scrip/100' mean on the Dividends table?
If as an investor you select to receive shares (ie. reinvest) in lieu of a dividend payout, the Scrip/100 ratio indicates the number of shares you will receive per 100 shares you currently hold.

How is the P/E Ratio calculated?
The P/E ratio is the relationship between the market Price of the share and its Earnings per share (EPS).  This simple ratio gives a clear indication of how a company is "rated" by the market (see below for tips on interpretation).

At a calculation level, there are several factors which complicate this apparently simple ratio.  The points below explain why the P/E ratio from different sources may not be the same.  The one constant is the market Price, which is usually the closing price on any particular day.

1.  Firstly, the definition of Earnings Per Share is not universal.  uses Headline Earnings per Share (HEPS), which is EPS with the effects of exceptional items stripped out.  Where a company has exceptional items, different results will be obtained for the P/E ratio using EPS and HEPS.

2.  Secondly, there is an issue regarding the timing of the calculation.  In the JSE price feed, the P/E is calculated on available information.  At year end, the new earnings figure is not known, so the P/E is still based on the previous interim and final.  In fact, this situation can continue for three or four months.

When we capture the financial statements, however, we know the HEPS figure, and can calculate the "actual" P/E at the financial year end.  This is the figure we store as a line-item in the financials.  The JSE do not back-calculate their P/E values to the year end, so the P/E line item in will differ from the P/E which the JSE reported on that day.

A simple example helps to clarify this.  ABC Ltd has a June year end, and had interim earnings of 10c at December and 18c the previous June.  On 30 June, the share is trading at 290c.  The JSE calculates the P/E as 15.3 (290/19) on the day.

Two months later, end August, ABC publishes their results for the year ended 30 June. HEPS for the full year was 23c. For 30 June, we calculate the P/E as 12.6 (290/23) and store this with the summarised financials in the database.

3.  A third factor relates to adjustments to the reported EPS or HEPS figure. Obviously HEPS must be adjusted for a share split or consolidation.  But less obvious adjustments also need to be made in the cases of unbundlings, acquisitions, and other corporate events.  The timing and calculation method of these adjustments can also cause discrepancies in reported P/E ratios.

Interpretation of the P/E Ratio>

The P/E ratio is the simplest way to gauge the "rating" enjoyed by a share.

A high P/E ratio means that investors are prepared to pay a high price in relation to historical profits.  Conversely, a low P/E means that investors are not prepared to pay much in relation to historical profits.  At the time of writing, Pick n Pay is trading at 1190 on a P/E of 19.9, while Edcon is trading at 2760 on a P/E of 6.8.  This means that investors are prepared to pay almost 20 times historical profits for Pick n Pay, but only 7 times for Edcon.  If Edcon could enjoy the same "rating" as Pick n Pay, its share price would rise to over R80.00.  If Pick n Pay was "down-rated" to the same level as Edcon, its price would drop to around R4.00.  And this is without any change in the operating profits of either company -- that is the real significance of the market rating.

A high P/E implies that expectations of future profits are good, and a low P/E implies that expectations are poor.  Investors are prepared to pay a high P/E multiple for Pick n Pay because they believe that next year's profits will be a big improvement on last year's.  Conversely, Edcon's low P/E is saying that investors don't believe Edcon will match or improve on last year's profits.  If the market is wrong, Edcon will prove to be a bargain at 2760.

As a rule, companies that consistently improve profits from year to year enjoy higher ratings -- these are the so-called "growth" shares.  Companies with inconsistent, volatile earnings records tend to have lower P/Es.

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