Question

1. describe how each parameter is calculated and what does it mean for investing :

1. Earnings per share (EPS)
2. Market Cap
3. PE ratio
4. Price to book ratio
5. PEG ratio
6. PEGY ratio
7. Large Cap versus small cap companies ( give couple if example of each , names of companies and current market cap)
8. Which is more volatile, large cap or small cap stocks, explain why?

Which has higher beta, a large value cap stock or growth stock? Provide example with company names and BETA for each)

1. What does Beta measure?
   10. Which has higher BETA, large cap stock or growth stock? Provide examples; company names and Beta value.

Answer 1

Parameter	Formula	Significance
EPS	Net Income / Average no. of outstanding shares	Earnings per share or EPS is an important financial measure, which indicates the profitability of a company. The higher the earnings per share of a company, the better is its profitability.
Market Cap	Market price per share * Total no. of outstanding shares	It allows investors to understand the relative size of one company versus another. Market cap measures what a company is worth on the open market, as well as the market's perception of its future prospects, because it reflects what investors are willing to pay for its stock.
PE ratio	Market price per share / Earnings per share	The price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings. A high P/E could mean that a stock's price is high relative to earnings and possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative to earnings.
PBV ratio	Market price per share / Book value per share	The P/B ratio reflects the value that market participants attach to a company's equity relative to the book value of its equity.
PEG ratio	[Market Price/EPS] / EPS Growth	One weakness of the P/E ratio is that its calculation does not take into account the future expected growth of a company. The PEG ratio represents a fuller more accurate valuation measure than the standard P/E ratio. The PEG ratio builds upon the P/E ratio by factoring growth into the equation. Factoring in future growth adds an important element to stock valuation since equity investments represent a financial interest in a company's future earnings.
PEGY ratio	[Market Price/EPS] / (EPS Growth + Dividend Yield)	A PEGY ratio below 1.0 represents a potential investment opportunity as it indicates the stock has high dividend yields or potential growth and is currently selling at a bargain price.

Criteria	Large Cap	Small Cap
Size	Large-cap stocks are issued by corporations with a market capitalization of $10 billion or more	Small-cap stocks are issued by corporations with a market capitalization between $250 million and $2 billion.
Differences in Growth	Many large-cap stocks, meanwhile, are so big that it is more difficult to achieve massive growth. Smaller, steady gains tend to be a worthy goal for large caps	Small-cap stocks are typically younger and seek to achieve aggressive growth, ultimately building to mid-cap and then large-cap status. Because they have a lot of room to grow, they often offer greater potential gains in share price and a higher return for investors.
Risk of Investment	Large-cap stocks tend to be less volatile during rough markets as investors fly to quality and stability and become more risk-averse	Small-cap stocks are much more volatile as they represent much higher-risk investments than large-cap stocks. Future success is not certain for these companies. Management is often short on experience, and many of the companies still lack typically resources.
Use of Dividends	Large-cap stocks frequently offer dividends as an incentive for investors, providing a steady source of income and a financial motive to purchase shares. Dividends are payments to shareholders from a company's profits and are distributed at regular intervals	Small-cap stocks do not offer dividends to their investors nearly as often as large-cap stocks. Instead of issuing dividends with their profits, small-cap stocks are more likely to reinvest those profits into the company, helping to fuel growth
Examples	Microsoft [$ 1,363.1 Bn] Apple Inc. [$ 1330 Bn] Amazon [$1811 Bn]	Karyopharm Therapeutics Inc. (KPTI) [$1.8 Bn] XBiotech Inc. [$0.41 Bn] Virtus Investment Partners Inc. [$0.6 Bn]

(i) Beta is a statistical measure of a stock's relative volatility to that of the broader market (typically the S&P 500), where it can be interpreted as a measure of riskiness.

(j) Growth stocks tend to have higher beta than value stocks. Growth investors and investors with high risk tolerance may be interested in looking for high-growth, high-beta stocks. High-beta stocks can be used for generating high returns but they also have significant downside risk when markets fall. Understanding beta and its uses can be important for growth investors seeking to identify the best performing stocks at large.

Eg. Advanced Micro Devices (AMD) - beta of 3.2

SVB Financial Group (SIVB) - beta of 2.5

United Rentals, Inc. (URI) - beta of 2.5