I’ve read through the FAQ Knowledge base on graphing quarterly TTM Earnings and Price.
I’m not the most computer savvy, but have been working on creating a spreadsheet to help me keep track of companies I follow.
I don’t use Google Drive (well I do, but I don’t create spreadsheets with Google). I’d like to share my excel document with folks for input on a few specifics and to see if it helps anyone.
Alas, I don’t know if there is a way to do this.
Can anyone offer any assistance?
Lastly, Saul generally normalizes the PE on his graphs to a ratio of 20. Meaning that TTM EPS on the left will have an equivalent stock price of 20x on the right. Wouldn’t it be prudent to adjust the normalized PE based upon the stock? For instance with Facebook, I use a PE of 50. Using a mid-range PE basis seems to help visually depict the current stock value.
Lastly, Saul generally normalizes the PE on his graphs to a ratio of 20. Meaning that TTM EPS on the left will have an equivalent stock price of 20x on the right. Wouldn’t it be prudent to adjust the normalized PE based upon the stock? For instance with Facebook, I use a PE of 50. Using a mid-range PE basis seems to help visually depict the current stock value.
AJ, when I look at a stock with a PE around twenty, I see “Look, the stock price is right around the trailing earnings, where it should be”. When I look at a stock with a PE of 50 or 70, I say to myself “Holy crap, the price is way up there but the trailing earnings are way down here.” Keeps things in better perspective for me, and ABOVE ALL, allows accurate comparison from one stock to another.
Thanks for the reply. I wasn’t using a log scale for the y-axis before so I added another graph to my spreadsheets. I have about 12 companies that I’ve filled in.
If anyone wants to see my spreadsheets, I’d love your input. You can email me privately and I’ll send for your review and input.
I’m wondering if this is a good, electronic way to use Saul’s graphs.
Also nice, would be to show today’s price and have the TTM PE automatically updated as well. I tried but failed at that.
So there are two charts. One that uses a log scale with a normalized PE of 20 and another that uses a linear scale with a normalized PE for each stock that I chose.
The log chart gives a better feel for how one stock compares to another all things being equal. The linear chart gives a better feel for how a company is performing relative to its past valuation.
At least that is what I think. Again, I’d be interested in other’s input. This isn’t anything fancy as I’m no JSeargent with spreadsheets.
Thought you might be interested in the links below, not to subscribe to the services, but to just get ideas for your own spreadsheets.
This first one is the service that Peter Lynch used. They’ve been around since 1933. I used them myself for several years. They use a P/E of 15 so shows how times have changed!
This next one is a service offered by Chuck Carnevale called F.A.S.T. Graphs. If you read articles on Seeking Alpha you’ve probably seen one of these graphs at one time or another.
The log chart gives a better feel for how one stock compares to another all things being equal. The linear chart gives a better feel for how a company is performing relative to its past valuation.
The log chart gives a better feel for how one stock compares to another all things being equal. The linear chart gives a better feel for how a company is performing relative to its past valuation.
AJ, Unfortunately, a linear scale isn’t really good for much on a long term basis. Let me try to explain why (awkwardly) in words. It’s hard to do it in words rather than illustrations but here goes:
If you use the same size scale throughout a $1 move for a $10 stock will look the same as a $1 move for a $20 stock or $40 stock, or an $80 stock, but it’s not.
If you use a linear scale a $1 move will look the same for the same stock at $10 and when it’s at $20, or $40, but it’s not.
If you use different linear scales depending on the stock price (say you use smaller gradations for a $20 stock than for a $10 stock) when the $10 stock gets to $20, and the $20 stock hasn’t moved, you’ll have two stocks at $20, but one will be on twice the scale of the other.
I could go on, but to get sensible readings over time, you need a log scale on the vertical axis. And the same size for all your stocks so that a similar move gives you a similar visual picture (i.e. A move from $10 to $11 looks exactly like a move from $40 to $44).
Great system you have … wish I was as mastered as you, but alas … gimmee some time, maybe I’ll get there. But this -
Have you, or do you, ever considered doing things by percentages only? A 7% move for a $5.00 stock (35 cents) vs. a 7% move for a $50.00 stock ($3.50) will chart the same even though it is a lot more dollars. After all, what I’m after (aren’t we all) is a certain percent return on our money. ie - the more money I invest at 7% as opposed to ,say, 3% will be more money returned. I tend to invest more money in companies giving a greater return - if it is a solid company.
Comments?
Thanx,
Rich (haywool)investing since 1975 … new to your style
Have you, or do you, ever considered doing things by percentages only? A 7% move for a $5.00 stock (35 cents) vs. a 7% move for a $50.00 stock ($3.50) will chart the same even though it is a lot more dollars. After all, what I’m after (aren’t we all) is a certain percent return on our money. ie - the more money I invest at 7% as opposed to ,say, 3% will be more money returned. I tend to invest more money in companies giving a greater return
Hi Rich, I was a little confused at what you were getting at, but percent gains is the only thing I think about. It doesn’t matter if I have one share of a $50 dollar stock or ten shares of a $5 stock. It’s the same thing. And a 7% move is a 7% move.
even though it is a lot more dollars.
It’s not a lot more dollars because what you are doing is investing a same amount in two different companies, not just buying one share at $50 or one share at $5. You end up with more shares of the cheaper stock, and a 7% move is the same number of dollars, irrespective of the stock price.
I ended up making some modifications to my spreadsheets thanks to input from Ears. Again, if anyone wants to see the charts shoot me an email.
I like both the linear graphs showing relative historical comparisons for a selected “mid-point” PE and the log charts which can be used to compare company to company.
I still have quite a few companies I’m looking to populate, but this exercise has been helpful for understanding these companies.
I’ve been bullish on GILD and this process reinforced my opinion.
AJ, Thanks for offering the sheets. I tried to do this in excel last year but was not successful. Could you tell me how to send you my email address? I tried looking up for a way to send a message to you on your profile but didn’t find it. Alternatively, you could also share it using Dropbox.
Before you Submit or Preview your message there are three boxes below those buttons. The “Post this Reply to the Boards” is automatically checked. If you want to just send to the author, uncheck that box and check “Email this Reply to the Author”.
I kept both checked for this message so you should see an email coming from me which you can reply to. I’ll send you my spreadsheets.
AJ ,
I am struggling to set up a semilog graph. would you mind saying how you did it on excel.
I use googlesheet
I had googled but got lost.
thanks
usha
I’m sure there are nuances between different Excel versions. I just updated to Office 2013 from 2010. I did a little research in the “help” menu at it was pretty easy.
Do you have Office 2013 or Excel 2013?
To generate two vertical axes, you need to use a Combo Chart. You can then manipulate the Format of each axis.
