What are stocks? This question is often asked by investors when starting to learn about the stock market. Through this article, PHS will give an overview of stock knowledge as well as stock index characteristics for investors' reference.

What are stocks?

Stocks are securities, issued in the form of certificates, or book entries, confirming the legitimate rights and interests of investors when participating in business activities of enterprises.

The stock holder becomes the shareholder and at the same time the owner of the issuing company.

Stocks

Stock code is a sequence of 3 letters or including letters and numbers representing the business, used to identify and buy and sell on the exchange.

Stock indices and the meaning of stock indexes you need to know

A statistical stock index, which measures the volatility of a number of stock portfolios. Based on this index, investors assess the potential level, future stock valuation, and profitability of the stock.

Basic information about indicators that cannot be ignored when analyzing stocks:

Book Value

Book value is the book value of shares representing the value of all assets (excluding intangible assets) of an enterprise minus liabilities and is reflected in the financial statements.

Formula: BPS (Book Value per share) = (Equity – Intangible Assets) / Number of shares outstanding

Or:     BPS =  (Total Assets – Intangible Assets – Liabilities) / Number of outstanding shares

EPS

EPS is known as the return that an investor earns per share. From there, it shows the ability of the business to generate profits, through the income that the company allocates per outstanding share.

| Formula: EPS = (Earnings after tax – Preferred dividends) / Number of shares outstanding

P/E

P/E is a ratio used to compare the market price of a stock with the earnings per share of a business.

Formula: P/E = Market price of stock / earnings per share (EPS)

‣ Low P/E: means the stock is undervalued.

‣ High P/E: The market has high expectations for businesses with higher profitability in the future.

P/B

P/B is a ratio used to compare a stock's market price with its book value.

Formula: P/B = Market price of stock / Book value per share

‣ P/B > 1: Investors are expecting the future and are willing to pay more for the book value of the business.

‣ Case P/B < 1: Maybe the market is thinking that the company's asset value is over-inflated.

ROA - ROE

ROA is the ratio of net return on assets, used as a measure of profitability per dollar of assets of the company.

Formula: ROA = Net profit for common shareholders / Total assets

ROE is the ratio of net return on equity, considered the most important ratio for shareholders, measuring the ability of common shareholders to return per dollar of capital.

Formula: ROE = Net profit for common stockholders/Common equity

NAV

The NAV ratio represents the market value of each share of a business, used to assess whether the company's asset value is commensurate with current information and valuation.

Formula: NAV = (Total value of assets – Total liabilities) / Number of shares outstanding in the market

BETA

Beta coefficient is used to measure the price volatility and risk of a security to the market. Specifically, the market will have a fixed coefficient of Beta = 1, if the stock has a Beta greater than 1, it will be more risky and vice versa.

This article of PHS hopes to answer the unknown What is a Stock? and other important information and notes to know when new investors start to participate in the market. If you want to participate in the stock market, please contact to open an account and accompany PHS today!