Basics About Share Trading

1. TTM Earnings per share (EPS)

The higher a company's EPS, the more profitable it's likely to be, though a higher TTM
stands for trailing twelve months.
Earnings per share (EPS) is a measure of a company's profitability, calculated by dividing
quarterly or annual income (minus dividends) by the number of outstanding stock shares.
The higher a company's EPS, the greater the profit and value perceived by investors.
EPS isn't a guarantee of future performance.
1. The EPS ratio of Petronet LNG is 23.27.
2. The EPS ratio of Adani Total Gas is 5.19.
3. The EPS ratio of GAIL is 8.04.

2. TTM Price to earnings ratio (PE)

A good P/E ratio is lower than the average P/E ratio, which is between 20–25.
Price to earnings ratio, or P/E, is a way to value a company by comparing the price of a
stock to its earnings.
The P/E equals the price of a share of stock, divided by the company's earnings-per-share.
When looking at the P/E ratio alone, the lower it is, the better. For new investors, “P/E”
might as well mean “physical education.” or “price multiple.”
The basic definition of a P/E ratio is stock price divided by earnings per share (EPS).
TTM PE is the current share price divided by the last 4 quarterly EPS.
TTM PE is easy to calculate because companies declare the financial results including EPS
every quarter.
The price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a
company in order to receive $1 of that company's earnings.
This is why the P/E is sometimes referred to as the “price multiple” because it shows how
much investors are willing to pay per dollar of earnings.
As far as Nifty is concerned, it has traded in a PE range of 10 to 30 historically.
Average PE of Nifty in the last 20 years was around 20* So, PEs below 20 may provide good
investment opportunities;
Lower the PE below 20, more attractive the investment potential.

1. The TTMPE ratio of Petronet LNG is 9.00.

2. The TTMPE ratio of Adani Total Gas is 216.40.
3. The TTMPE ratio of GAIL is 17.43.
The sector PE is 31.31.

3. Return on Equity (ROE).

Return on equity (ROE) is the measure of a company's net income divided by its
shareholders' equity.

Return on Equity = Net Income / Equity of the Shareholders.

Suppose Company XYZ Ltd.’s current net income (Profit After Tax) is Rs 2,000 crore.
It has a net worth (shareholder's equity) of Rs 15,000 crore.
ROE = 2,000 / 15,000 = 13,333.
ROE increases as the denominator shrinks
ROE is a gauge of a corporation's profitability and how efficiently it generates those profits.
The higher the ROE, the better a company is at converting its equity financing into profits.
ROE is more useful from a shareholder point of view and from the point of view of
determining the trajectory of the P/E Ratio.
An ROE of more than 25% is desirable for a company.
ROE offers a useful signal of financial success since it might indicate whether the company is
earning profits without pouring new equity capital into the business.
net income refers to your company’s bottom-line profit (before dividends are paid to common
shareholders), as reported in your income statement. You can calculate your shareholder
equity by subtracting liabilities from assets.
The earnings per share (EPS) ratio is effectively a restatement of the return on equity (ROE)
ratio. While the ROE ratio is calculated as a percentage, taking total net profit and total equity
into consideration, the EPS ratio shows how much profit has been earned by each ordinary
share (common share) in the year.

4. Return on Capital Employed (ROCE)

ROE considers profits generated on shareholders' equity, but ROCE is the primary measure
of how efficiently a company utilizes all available capital to generate additional profits.
The term return on capital employed (ROCE) refers to a financial ratio that can be used to
assess a company's profitability and capital efficiency.

5. Face Value and Book Value

Face value is the original value of a share as shown in the share certificate or books of the
company.
Whereas book value is the value of a shareholder's equity as per books of accounts.

Book value is based on its balance sheet; market value on its share price.
If book value is higher than market value, it suggests an undervalued stock.
If the book value is lower, it can mean an overvalued stock.
Book value is calculated by taking the aggregate value of all its assets and deducting all the
liabilities from it.
Suppose that XYZ Company has total assets of $100 million and total liabilities of $80
million. Then, the book valuation of the company is $20 million.
Assets include both current and fixed assets, and liabilities include both current liabilities and
non-current liabilities.

6. Price-to-book value (P/B).

Price-to-book value (P/B) is the ratio of the market value of a company's shares (share
price) over its book value of equity.
The book value of equity, in turn, is the value of a company's assets expressed on the
balance sheet.
The price-to-book (P/B) ratio measures the market's valuation of a company relative to its
book value.
The market value of equity is typically higher than the book value of a company's stock.
The price-to-book ratio is used by value investors to identify potential investments.
P/B ratios under 1.0 are typically considered solid investments by value investors.

1. The P/B ratio of Petronet LNG is 2.07.

2. The P/B ratio of Adani Total Gas is 42.11.
3. The P/B ratio of GAIL is 1.42.

7. Beta in share trading

Beta is a concept that measures the expected move in a stock relative to movements in the
overall market.
A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a
beta less than 1.0 indicates a stock with lower volatility.

1. The Beta value of Petronet LNG is 0.56.

2. The Beta value of Adani Total Gas is 1.71.
3. The Beta value of GAIL is 0.78.

8. Current and Savings Account Ratio (CASA) ratio.

CASA ratio stands for current and savings account ratio.
CASA ratio of a bank is the ratio of deposits in current, and saving accounts to total deposits.
CASA Deposits = Deposits in Saving AC + Deposits in Current Account = 50 Cr + 75 Cr =
125 Crores.
Then, CASA Ratio = CASA Deposits / Total Deposits = 125 / 225 = 0.55.
This ratio of 0.55 indicates that 55% of the money in the banks is utilized for transactions and
45% are long-term deposits for banks to lend money.
A higher CASA ratio means that the bank has a higher share of deposits in current and
savings accounts.
A higher CASA ratio also indicates a better operating efficiency of the bank.

9. Capital Adequacy ratio

The capital adequacy ratio, is a comparison of the available capital that a bank has on hand to
its risk-weighted assets.
The ratio provides a quick idea of whether a bank has enough funds to cover losses and
remain solvent under difficult financial circumstances.
he capital adequacy ratio (CAR) is a measure of how much capital a bank has available,
reported as a percentage of a bank's risk-weighted credit exposures.
The capital ratio is the percentage of a bank's capital to its risk-weighted assets. Weights are
defined by risk-sensitivity ratios whose calculation is dictated under the relevant Accord.
Basel II requires that the total capital ratio must be no lower than 8%.

10. NPA – Non- Performing Assets

NPA meaning in banking are those assets that are considered nonperforming when the
borrower fails to make timely payments of principal and interest for a specified period,
usually 90 days or more.
Indian banks' weak loans (better known as non-performing assets or NPAs) is projected to
drop to 4.5 per cent at the end of Fiscal Year 2023-24, and to 3.5 per cent at the end of Fiscal
Year 2024-25, S&P Global said on Thursday. It does not expect interest rates to rise much in
the near future.
G-NPA – Gross Non-Performing Assets.
N-NPA – Net Non-Performing Assets.

As on 24.01.24
IDBI Bank - Total Deposits ₹2,49,481 CASA Ratio 51.5%
J&K Bank- Total Deposits ₹1,26,590 CASA Ratio 50.6%
Kotak Bank- Total Deposits ₹4,00,963 CASA Ratio 48.3%
IDFC First Bank- Total Deposits ₹1,64,726 CASA Ratio 46.4%
Axis Bank - Total Deposits ₹9,55,556 CASA Ratio 44.4%

Important parameters to analyze the bank shares

1. CAR – Capital Adequacy Rati – denotes
how the bank was safe.
2. G NPA – Gross Nonprofit asset
3. N NPA – Net nonprofit asset
4. CASA - Current and Savings Account
Ratio – Denotes the wealthiness of bank.

2. NPA

You need more discipline not capital.

You need more patience not stocks.
You need more consistent not strategies.
You need more calmness not excitement.
You need to learn all in the market just simple things works in market.