Measuring Trading Performance
Performance metrics: what are they, why are they important and how can they help you?
On Tuesday 9 June we heard from CSL: The company said that its $1.6 billion buy-back would improve its investment return metrics such as EPS and ROE.
On Tuesday 9 June we heard from CSL: The company said that its $1.6 billion buy-back would improve its investment return metrics such as EPS and ROE.
So what are these investment return metrics and why are they important?
They are important because they measure business performance.
Earnings per share (EPS)
Earnings per share or EPS measures the profit per share. This measure allows you to compare a company’s own performance from year to year. While EPS can be relevant to comparing against the company’s own performance in prior years, it doesn’t help when trying to compare against its peers.
Return on equity (ROE)
If you want to compare against peers, this is where a ratio like return on equity (ROE) comes in. ROE measures performance and generally, the higher the better.
Performance ratios like ROE concentrate on past performance to gauge on future expectation.
It’s essentially a scorecard against peers. For example, if you were to measure the return on equity of the big four banks, here’s what you’d find:
Return on equity
ANZ – 11.6%
CBA – 18.3%
NAB – 13.9%
WBC – 21.3%
The higher the ROE, the better. And in this case, Westpac takes the lead, followed by CommBank.
Of course, one thing to keep in mind is that this scorecard measures the past and doesn’t take into account strategies that may help it outperform in the next set of figures.
The higher the return on equity, the more easily the company will be able to raise money for growth. After all, as a potential shareholder, I would be more comfortable seeing an ROE above 20% then one below 10%.
Remember, ROE is a measure of performance. The higher the performance the better, but try and look at more than one years’ worth of numbers.
You want to see a consistently high ROE year after year. You do not want to see a terrific result one year and then a fall the following.
So there it is. Use EPS to compare against the companies own prior performance and ROE to measure against peers.
Both help evaluate the performance of the underlying business. After all, a company is not just a share price moving up and down, up and down, but underlying the price is an actual business. And one way to see if the business is doing well is by using these investment return ratios.
Happy trading!
About the Author
Julia Lee is an Equities Analyst for online share trading platform Bell Direct. Julia provides information on share trading and stock market research for frequent traders and investors.
|
|
Amco Basic Ingredients Stainless Steel Measuring Cups, Set of 4 $9.89 Description: The Basic Ingredients Measuring Cups deliver shiny polished 18/0 stainless steel quality and ultimate performance. Each measuring cup has easy hang handles. Truly designed for the professional, you will love it in your kitchen! These come from the same manufacturer who sell to William Sonoma……made to last a lifetimes. Color: stainless steel Items included & Size & Measurements: Se… |
|
|
Amco Measuring Cup and Spoon Set $15.13 Description:Wonderful 8 piece set of Professional measuring cups & spoons Professional Performance Measuring Cups and Spoons are fashioned of heavy gauge top quality 18/8 stainless steel, and engineered for precision accuracy to assure consistency in food preparation time and time again. Measuring cups are flat bottom and designed to balance on the counter without tipping. Storage is wonderful, as… |
|
|
Trade with the Odds + App: How To Construct Market-Beating Trading Systems (Bloomberg Financial) $56.70 Hands-on tools to identify and profit from the market’s recent patternsTrading is all about managing probabilities. In Trading with the Odds, Anthony Trongone explains that the quest for developing a perfect system, which drives most traders, is fruitless. Instead, traders should focus on developing the analytic and trading skills necessary to stay in tune with the constant evolution of the financ… |
|
|
Investing in People: Financial Impact of Human Resource Initiatives $35.44 Susan R. Meisinger on Investing in People: Financial Impact of Human Resource Initiatives “If you can’t measure it, you can’t manage it.” It’s a lesson I learned more than twenty-five years ago, as a young manager, from one of the most effective executives I’ve ever worked with. More importantly, I also learned that “measuring it” wasn’t enough. What’s measured, why it’s measured, and how th… |
|
|
The Economics Shelf.(Book review): An article from: Internet Bookwatch $9.95 This digital document is an article from Internet Bookwatch, published by Midwest Book Review on April 1, 2010. The length of the article is 741 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.Citation DetailsTitle: The Economics Shelf.(Book review)Autho… |
|
|
Reconyx HyperFire Infrared Digital Game Camera HC600 $549.95 HyperFire HC600 High Output Covert IR Infrared Scouting Camera Uses No-Glow High Output Covert Infrared Technology to eliminate the tell-tale red glow common to other infrared cameras and features a flash range of up to 50 feet. The camera uses 12 AA NiMH rechargeable or 1.5-Volt Lithium batteries, enabling the camera to operate continuously for up to one year (up to 30,000 images). The 3.1 mega… |
|
|
Bushnell Laser Rangefinder Yardage Pro Sport 450 $149.94 Yardage Pro® Sport 450®Laser RangefinderLet it hinge on a guess, or nail it with this. The shot of a lifetime is a time for certainty. With the Yardage Pro Sport 450, you’re confident to the last yard. It’s affordable, simple to use and features a slim, weather-resistant design that’s handy in a pinch. Now, jerky or sausage?Features Compact design Weather resistant Textured grip 5-yard minimum d… |
|
|
Bushnell Fusion Arc 1600 12X50 Rangefinder Binocular $1,609.95 Bushnell 12×50 mm Fusion 1600 ARC Laser Rangefinder Binoculars delivers pinpoint ranging to 1,600 yds.! The best in Bushnell optics meets world-class laser range-finding! Fully multicoated optics and BaK-4 prisms provide enhanced resolution and contrast for stunning views, plus a built-in ARC bow and rifle modes deliver “shoots like” horizontal distance, bullet-drop and holdover info to put you de… |
|
|
Measuring Investment Performance by Spaulding, David Edition ILL, 0 $16.49 Measuring Investment Performance. Spaulding, David |
|
|
Measuring and Managing Performance in Organizations $44.31 An analysis of organizational performance measurement, focusing on how people react to measurement systems, for managers and project staff creating a program for managing organization performance. Compares successful and unsuccessful programs, provides examples in fields such as drama, economics, and software engineering, and includes interviews with eight experts in measurement for managing software development. Annotation c. by Book News, Inc., Portland, Or. |
|
|
Measuring Anaerobic Performance in Children $172.06 This series of studies examined the anaerobic performance of children using accumulated oxygen deficit (AOD). Initially a crosssectional maturational profile of anaerobic performance was investigated with accompanying blood borne markers of exercise intensity. The second study varied the methodology prescribed by Medbo and his colleagues (1989) and investigated whether discrete or continuous submaximal exercise had an impact on AOD. The final study determined whether there was a difference in AOD when cycling and running were used as the exercise modes in the same group of participants. Author: Meldrum, Kathryn Binding Type: Paperback Number of Pages: 252 Publication Date: 2011/01/31 Language: English Dimensions: 5.98 x 9.02 x 0.57 inches |
|
|
Measuring Computer Performance $337.72 This book is in Used condition |
|
|
Measuring Organizational Performance $45 This book is in New – Excellent condition |
|
|
Measuring Occupational Performance $50.3 This book is in New – Excellent condition |
|
|
Measuring the Performance of the Hollow State $64.17 This book is in Used condition |
|
|
International Purchasing Strategy $116.4 New – Faustino Taderera, the most towering figure, the most published, polished and celebrated International Purchasing/Supply Chain, Marketing and International Business academic, icon and guru in Africa, wrote this book, International Purchasing Strategy, as an advanced course at undergraduate and postgraduate level and covers topics like:- purchasing plans; supplier appraisal and evaluation; measuring supplier performance; supplier relationships; low cost centres; the Asian Tigers; trading bl |
|
|
International Purchasing Strategy $116.4 Used – Faustino Taderera, the most towering figure, the most published, polished and celebrated International Purchasing/Supply Chain, Marketing and International Business academic, icon and guru in Africa, wrote this book, International Purchasing Strategy, as an advanced course at undergraduate and postgraduate level and covers topics like:- purchasing plans; supplier appraisal and evaluation; measuring supplier performance; supplier relationships; low cost centres; the Asian Tigers; trading b |
