Flnd hrchen, to answer your HCPC notes…
Be careful asking these types of questions or you might mess around and get a 20 page post (LOL)! Just joking, but I will try to answer your questions in 2 pages or less (LOL)!
To answer your first question:
With determining the EPS, the EPS is derived from “always” using the Outstanding Shares (OS) as the common denominator for “official and actual” Earnings announcements. This is why it is always so important to know this amount with any stock that files as you can go to any reporting stock in the market that files to see that such is used.
There have been times for our purposes to where I tailor my posts to fit what I think might make things easier for a particular environment. Like sometimes I might use the Authorized Shares (AS) as the common denominator instead of the OS for assessing a “speculative” valuation when the OS is unknown to help maybe determine a worse case scenario “potential” within a stock. I do mention when at those times when I do such. What I generate should not be considered “official” or the gospel.
When I post my valuations, please understand too that to keep things simple, I use a formula which is derived from the formula below:
Net Income ÷ Outstanding Shares (OS) = Earnings Per Share (EPS)
Net Income is derived by…
Net Income = Revenues – Expenses (including Interest, Taxes, Depreciation and Amortization)
When I post a “potential” valuation on a stock, I use the word “Income” to mean “Net Income” and I automatically consider figured into the Expenses the “Interest, Taxes, Depreciation and Amortization” to keep the calculation simple. Like for an earlier valuation post before my recent one, I figured that the “Interest, Taxes, Depreciation and Amortization” were already accounted for as I had derived that amount for Expenses from averaging up from what was filed by the company quarterly/annually. These variables are often already calculated into the Expenses of a stock if derived from the right filings.
It really depends on the situation and the stock. At those specific times when I am doing such that I mentioned above, consider “Income” and “Net Income” to be synonymous with one another. Also, I have used “Profit” to be synonymous with Income in the past too. Still, when certain variables are unknown, I then try to use and explain such from what is known. This is why again my posts should definitely not be considered nothing “official” as they are nothing more than a tool to use as a format to substitute the unknown with the known once revealed.
To answer your second question:
Here with HCPC and my last valuation post, the flavor I wanted to make known or hoped to be understood was that 35% of the Income/Profits are to be used for share buybacks. This means that the other 65% of the Income must have already been originally proportioned off for being an amount to cover things such as “Interest, Taxes, Depreciation and Amortization” and other things in need of being covered. This is why I think the “35%” was delivered to us in such a finite amount of distribution.
Also, I believe that Income here is referred to as “Net Income” which also means that a derivation originally existed because an amount was originated from an initial amount of “Revenues” in order to begin the deductions. This also means that an amount was definitely considered as a deduction as part of the Expenses to get to an amount for Income as I mentioned from the formulas above.
So, with taken all of this under consideration, it is definitely much easier and fair for explanation purposes to simply use the 35% as Income to mean Net Income and divided it by the OS to get an EPS. So when you query about where the money if coming from for salaries and etc., hopefully you now see how it is calculated into the equation minus the 35% profits to be used for the share buybacks.
HCPC is its own stock with its own situation. The calculations for HCPC should be considered unique for fitting this HCPC situation and by no means is a guarantee that this logic will apply to any other stock.
My posts have my own personal touch to them for my reasons of thinking I’m making them easier to understand. Sometime I post under the thought that everyone has been following a stock as long as I and figure that we are all on the same page with our thinking, but that is not always the case. New investors could be arriving at any given time. I will try to do a better job in making sure I explain the flavor of the style I’m using at that time for simplicity sake in the future in hopes of helping one see the “potential” that exists in the stock.
I apologize for any confusion I might have caused as such was not my intentions. Hopefully this post has cleared a few things up.
v/r
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