Brad – I’m studying this topic, and it has me wondering if you’s share with me the formulae you are using in the SSG part 4 calculation. There are several formulae available in Excel, and I’d like to use the same as you’re using so that the data is comparable.
Any thoughts you’d care to share would be most welcome. I want to know what my portfolio is “returning”, and what each stock in it is likewise, because improvement of the Port’s return will only come from improving individual stock components.
I am really enjoying the SIG program. It seems to work flawlessly on my iMac, and I appreciate how I can go to it while another window is open and do an SSG and come back to a spreadsheet with the data needed. Great.
In the “PAR – Portfolio Analysis Review” segment, the table includes a column “% Rtn”. This I gather is the same as the Total Return figure from Part 4 of the SSG. The “PAR” return figure on the SSG is projected average return? And which return figure should I be using – Total Return, or PAR?
Great questions, which I think I will also post on my blog for all my users. (Don’t worry, I won’t use anything more than just your first name). There are, as you pointed out, a couple of different return calculations in the Stock Investment Guide (and Toolkit as well). There are some definitions available in SIG, if you enable Help Tags in preferences then point at the “P.A.R.” or the “Tot. Return” labels.
The following is actually from my InvestEd Presentation called Dig Deeper into the Stock Study Form that I presented in 2011.
Please let me know if you have any further questions. You are correct that the Portfolio Analysis Review Form uses Total Return.
Please let me know if you have any questions.
Total Return, called Compound Annual Total Return in Toolkit
Indicates total return if your stock achieves the selected high price and dividend is collected for 5 years
- Compounded growth rate to reach selected high price in analysis plus the 5-year stock yield
- Tot Return = 100*(1-(High Price / Current Price)^1/5-1) + 5 yr Yield
= 100*((High Price / Current Price)*0.2-1) + 5 yr Yield
5 Year Yield = 100*(Ave Payout * Projected EPS) / Selected High Price
Projected Average Return
Indicates the total return if you stock achieves a high price a the Average PE and average dividend is collected for 5 years.
- Compounded growth rate to reach a high price at the average PE ratio plus an average 5-year yield
- PAR = 100*(((Proj EPS*Ave PE Ratio)/Current Price)^1/5-1) + 5 yr Ave Yield
= 100*(1-((Proj EPS*Ave PE Ratio)/Current Price)^0.2-1) + 5 yr Ave Yield
5 Year Ave Yield = Average Dividend / Average Price =
(Ave Payout * Ave EPS) / (Ave PE * Ave EPS) =
Ave Payout / Ave PE
(Note Ave EPS cancels out in the 5 Year Ave Yield formula.)