Chart question for Saul

Saul,

SKX just had a 3:1 split. How do you handle that on the charts you plot to track price, earnings, etc.? Current P/E and 1YPEG are affected by earnings values going back a couple of years so there has to be some adjustment. I believe you said that you record earnings and revenue values in a “box” on the chart. Do you erase and adjust those? Do you leave the price chart alone and just show the drop in price from the split forward? Do you go redraw the whole thing? I’m curious how you handle that.

Thanks,
Steve

SKX just had a 3:1 split. How do you handle that on the charts you plot to track price, earnings, etc.? Current P/E and 1YPEG are affected by earnings values going back a couple of years so there has to be some adjustment. I believe you said that you record earnings and revenue values in a “box” on the chart. Do you erase and adjust those? Do you leave the price chart alone and just show the drop in price from the split forward? Do you go redraw the whole thing? I’m curious how you handle that.

Hey Steve. I’m not Saul, just a fan. The split won’t change anything because everything is calculated as a ratio. A $15 stock with $3 of earnings is the same thing as a $5 stock with earnings of $1. The chart would look exactly the same from pre-split to post-split.

Jeb
Long SKX
See all my holdings here: http://my.fool.com/profile/TMFJebbo/info.aspx

I’ll also note that for people who take literally what Saul wrote about graphing, if you’re even modestly proficient with spreadsheets, you can build the same info pretty easily and graph it as well. In that case, changing the graph axes/labels is pretty easy as well. (Plus, you don’t need to tape together two sheets of paper if you cross a boundary.)

But then again, if you’re a spreadsheet weenie like me, I probably didn’t need to tell you that.

as always, i am full of carp

The split won’t change anything because everything is calculated as a ratio. A $15 stock with $3 of earnings is the same thing as a $5 stock with earnings of $1.

Jeb,

Thanks for the reply. What you say is entirely true and I get that. However, while this quarter will be reported with earnings at a proper ratio to the current price, the previous 3 quarters that need to be added to get the TTM earnings value to calculate the P/E (and 1YPEG) were not. So, some adjustments need to be made. The previous earnings also need to be divided by 3 in the case of SKX. I was really wondering how Saul handled that on his physical, paper chart.

Steve

Saul, SKX just had a 3:1 split. How do you handle that on the charts you plot to track price, earnings, etc.? Current P/E and 1YPEG are affected by earnings values going back a couple of years so there has to be some adjustment. I believe you said that you record earnings and revenue values in a “box” on the chart. Do you erase and adjust those? Do you leave the price chart alone and just show the drop in price from the split forward? Do you go redraw the whole thing? I’m curious how you handle that.Thanks,
Steve

Hi Steve, I assume you are talking about the semi-log graphs on which I graph monthly prices and trailing 12 month earnings.

If it’s a 2 for 1 split it’s easy. I just divide each quarter’s earnings by two in my table (revenue stays the same of course, just reminding you) and I divide the values of the stock price and earnings going up and down the left and right side of the graph by two, and the graph doesn’t have to be touched itself. For example, a point representing 80 cents trailing earnings, a $16 stock price (and a PE of 20), becomes a point at 40 cents, a stock price of $8, and the same PE of 20.

However with a 3 for 1 stock split, it’s too complicated. I just divided stock prices and earnings by three and redid the graph, but not all the way back, just for the last six quarters or so, and kept my old graph to refer to. You’ll be able to superimpose the new and old graphs. They will look identical (like the 2 for 1 split I described above), they will just be at different price points.

Does that help?

Saul

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Does that help?

Saul,

Yes, that does help. Thanks!

Steve

Is making the logarithmic scale easy as well? I’ve not figured that out.

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Is making the logarithmic scale easy as well? I’ve not figured that out.

I just used to buy a box of the semi-log paper. Now I copy the paper I have. I remember that there is a link to a printable site that you can find in the Knowledgebase section on graphing.

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