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Author Topic: Negative PE ratios.  (Read 10452 times)

Moonraker

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Negative PE ratios.
« on: March 12, 2014, 11:02:35 am »
Eg. ATT (-166)

What does that mean ? Are earnings negative, i.e. is ATT a huge loss-maker, maybe due to debt burden ?

 :wtf:
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jaDEB

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Re: Negative PE ratios.
« Reply #1 on: March 12, 2014, 11:29:21 am »
Negative P/E means negative earnings.

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jaDEB

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Orca

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Re: Negative PE ratios.
« Reply #2 on: March 12, 2014, 11:55:50 am »
jaDEB is correct but to understand this, think of it this way.

PE ratio is the price of the share divided by the Earnings Per Share or EPS. Either of the 2 can be negative to give a negative result but as the share price cannot be negative then it must be the EPS. So negative earnings is the culprit for a negative PE ratio.
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Patrick

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Re: Negative PE ratios.
« Reply #3 on: March 12, 2014, 12:29:36 pm »
Some sites show a zero instead of a negative.... I prefer to see negative so you can tell how badly a company sucks!
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Moonraker

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Re: Negative PE ratios.
« Reply #4 on: March 12, 2014, 01:13:32 pm »
Quote from: Patrick on March 12, 2014, 12:29:36 pm
Some sites show a zero instead of a negative.... I prefer to see negative so you can tell how badly a company sucks!
Not sucking necessarily. Take MDC with a current negative PE of 68. It's a great share, REM has a large holding.
In their case earnings were/are still negative due to a number of once-off items.
Quote
As reported in the interim results announcement on 6 November 2012, a number of
one-off items relating to the refinancing of the Groups debt occurred. Details of
a number of corporate activities were released on SENS during the year and a
summarised SENS announcement was released on 17 October 2012. The announcements
reported on the successful elective refinancing of the Groups debt and the
successful conclusion of a R5 billion rights offer, as well as the conclusion of
the buy-out of the minority interest in Emirates Healthcare (which has subsequently
been rebranded to Mediclinic and is referred to as Mediclinic Middle East hereinafter).
The one-off charges amount to R3 215m (R2 946m after tax) and comprise of the following:

- the derecognition of the mark-to-market liability relating to the Mediclinic
  Switzerland interest rate swap of R3 531m (R3 311m after tax);

- accelerated amortisation charges of capitalised financing expenses of R163m (R129m
  after tax);

- loan breakage charges of R54m (R39m after tax) relating to existing South African
  debt;

- Swiss stamp duty of R41m (R41m after tax), partially offset by a realised gain of
  R574m (R574m after tax) on foreign exchange forward contracts.

In addition, the Group results also include the following one-off items:

- a pre-acquisition Swiss tariff provision charge of R151m (R115m after tax); and

- a past service cost credit of R35m (R27m after tax) due at one of the Groups pension
  funds.

Including the one-off items, headline earnings declined by 182% to a loss of R1 007m
(2012: profit of R1 222m) and basic headline earnings per ordinary share decreased by
175% to a loss of 135.6 cents (2012: profit of 179.9 cents).
It's just confusing, and one would need to delve into the reasons.
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Patrick

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Re: Negative PE ratios.
« Reply #5 on: March 12, 2014, 04:38:01 pm »
Quote from: Moonraker on March 12, 2014, 01:13:32 pm
Quote from: Patrick on March 12, 2014, 12:29:36 pm
Some sites show a zero instead of a negative.... I prefer to see negative so you can tell how badly a company sucks!

It's just confusing, and one would need to delve into the reasons.
True, I can imagine there are many reasons why a good company could have negative earnings. Still wouldn't put my money on a P/E of 68 without some very good reasons though!
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Snakepit

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Re: Negative PE ratios.
« Reply #6 on: March 12, 2014, 07:56:06 pm »
Heheheheh  = MDC. What does Buffet say - buy when others are fearful. This looks like one of those shares. Fundamentals are still good. Actually this the the type of share that should be bought. But don't take my word for it.
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Moonraker

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Re: Negative PE ratios.
« Reply #7 on: March 13, 2014, 08:47:01 am »
Quote from: Snakepit on March 12, 2014, 07:56:06 pm
Heheheheh  = MDC. What does Buffet say - buy when others are fearful. This looks like one of those shares. Fundamentals are still good. Actually this the the type of share that should be bought. But don't take my word for it.

They have already reverted to positive EPS growth, and forward PE is about 19. So you can see how once off items can mislead. They used the low
interest rate scenario to refinance most of their debt. Good move.
Anyway, this is a 57 billion Rand giant. No. 28 by Market Cap. So, Patrick and Snakepit, sharpen your pencils.  ;)

UNAUDITED INTERIM GROUP RESULTS OF MEDICLINIC INTERNATIONAL LIMITED AND ITS SUBSIDIARIES FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013
AND DECLARATION OF CASH DIVIDEND


SALIENT FEATURES

- Strong growth in patient admissions and bed-days sold

- Positive effects of Group refinancing as well as acquisition of minority interests in Mediclinic Middle East completed in October 2012

- Basic normalised headline earnings per share increased by 58% to 152.0 cents

- Interim dividend per ordinary share increased to 28.0 cents (2012: 25.3 cents)
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