Frequently Asked Questions
B (beta) coefficient
Beta coefficient measures the volatility of a stock compared to that of the Stock Market Index. Depending on the level of Beta coefficient, stocks are categorized into defensive and aggressive. Defensive stocks are characterized by a Beta coefficient < 1 and their price volatility is lower than that of the General Index. Aggressive stocks are characterized by a Beta coefficient > 1 and their price volatility is higher than that of the General Index.
What is the stock price / book value
It is the market price of the stock divided by the book value of the stock, as it results based on the equity of the last company financial year valuation. In general, the higher the particular ratio, the more expensive the stock.
The current Price/Earnings Ratio per stock is the current price of the stock divided by the earnings per stock at the last financial year valuation. The P/E ratio may be calculated before or after taxes. Moreover, it may be calculated based on the anticipated profits for the next years.
In essence, the P/E ratio shows how many years will be necessary in order for the investor to recover, through the dividends (without reinvesting them), the capital he spent to purchase a stock.
It is a simple ratio to calculate, which is used in order to determine whether a stock is cheap or expensive compared to other stocks of the same sector. If the P/E ratio of a stock as lower than the respective P/E of the sector, it means that the particular stock is undervalued and therefore its price is likely to increase.