In: Accounting
2016 | 2015 | |||
Net Income | $1,14,000 | $ 70,500 | ||
Dividends to common stockholders | $ 15,000 | $ 15,000 | ||
Total stock holders' equity | $3,00,000 | $ 5,15,000 | ||
Preferred stock 5% | $1,05,000 | $ 1,05,000 | ||
Market price per share | $ 23.50 | $ 17.25 | ||
COMMON STOCK RATIOS: | ||||
1) | EPS: | |||
Net Income | $1,14,000 | $ 70,500 | ||
Preferred dividends | $ 5,250 | $ 5,250 | ||
Income for common shares | $1,08,750 | $ 65,250 | ||
Number of common shares | 43500 | 43500 | ||
EPS | $ 2.500 | $ 1.500 | ||
2) | RETURN ON EQUITY (ROE): | |||
Income for common shares | $1,08,750 | $ 65,250 | ||
Total equity | $3,00,000 | $ 5,15,000 | ||
Preferred capital | $1,05,000 | $ 1,05,000 | ||
Common equity | $1,95,000 | $ 4,10,000 | ||
ROE (Income for common shares/Common equity) | 55.769% | 15.915% | ||
3) | PRICE/EARNINGS: | |||
Market price per share | $ 23.50 | $ 17.25 | ||
EPS | $ 2.50 | $ 1.50 | ||
P/E | 9.400 | 11.500 | ||
EVALUATION: | ||||
The EPS and ROE have increased during the year 2016 indicating better performance. | ||||
Further, as the P/E ratio is lower, the share is a good buy. |