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Check
out our fundamental charts, powerful tools for the prudent
investor. See examples below.
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Market
timers, day traders and speculators are all catered
to by mainstream Wall Street and the financial press.
Fundamental,
long-term investors, are all but ignored. Finally,
prudent long-term investors have a resource to help them make
sound long-term investing decisions.
EDMP
is an abbreviation for Earnings
Determine Market Price.
This statement is not only logical, but also overwhelmingly supported
by a preponderance of undeniable and conclusive historical evidence.
In his best selling book, 'One up on Wall Street' another
great investor, Peter Lynch, summed it up succinctly:
| "You
can see the importance of earnings on any chart that has an
earnings line running along the stock price. On chart after
chart, the two lines will move in tandem, or if the stock
price strays away from the earnings line, sooner or later
it will come back to earnings." |
The charts traditionally offered by mainstream Wall Street focus
solely on stock prices. They use daily moving averages
or various so-called technical indicators in a vain attempt to
guess where stock prices will go in the short run. In contrast,
EDMP's charts focus on the fundamentals of the business
and are most useful in determining the fair or intrinsic value
of the company.
In 'One Up On Wall Street', Peter Lynch also said:
| "The
P/E ratio of any company that is fairly priced will equal
its growth rate. I'm talking about growth rate of earnings
here." |
We agree and believe a company is fairly valued when its stock
price trades at a P/E ratio that is equal to its earnings per
share growth rate. Therefore; PE=Earnings Growth Rate is the simple
formula that is the foundation of our fundamental charts.
The
following examples clearly illustrate the validity of these statements.
| Here
is ConAgra's earnings per share multiplied by its historical
earnings growth rate for the past 20 years. |
| These
are ConAgra's monthly closing stock prices for the past 20
years. |
| Here
we show both earnings and stock prices. Stock prices obviously
followed earnings. As Peter Lynch said "... if the stock
price strays away from the earnings line, sooner or later
it will come back to earnings." |
| Not
all companies are as consistent as ConAgra. Here is Shaw Industries
earnings per share multiplied by its average growth rate for
the past 20 years. |
| Here
is Shaw Industries monthly closing stock prices for the past
20 years. |
| Once
again, here they are together. In the long run, stock prices
correlate to or follow earnings. |
| As
you can see below, Laidlaw Inc. had very erratic earnings
and a historical price earnings ratio. |
| Below
you will notice that its monthly closing stock prices for
the past six years have an uncanny resemblance to its earnings
line. |
| Below,
we once again see that in the long run, earnings determine
market price. |
| Below
is the 20 year earnings line for Reynolds & Reynolds.
Notice how flat or how little its earnings grew for the first
twelve years and then accelerated dramatically for the last
eight. What would you guess its stock price did? |
| Below
are the monthly closing prices for Reynolds & Reynolds
for the past 20 years. |
| Here
they are together again, flat earnings and prices for the
first twelve years and both rising dramatically for the last
eight. However, even though the price rose faster than earnings,
it eventually came back to its earnings justified value. |
| As
you can see, the long-term relationship between earnings and
stock prices is most profound. When used properly, our charts
are powerful tools that can help investors make sound long-term
investing decisions. |
Our
chart program offers this historical perspective on more than
eight thousand public companies plus our very useful forecasting
charts as well.
Begin using our fundamental historical and forecasting charts by clicking here.
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EDMP, Inc. 