Hi Yong,
Sometime, the company net profit may be understated hence if you will to calculate ROE, it will be a lower figure. Therefore, using Cash Flow to Equity will give a better picture of the true earning of the company. It works the same as ROE in this context.
Thanks, Vic. What is advisable ratio in this scenario? > 10%?
I will say at least 15% but please don;t get to fixed by the rule because you may miss some multibagger companies too. The important things are Business comes first follow by management. Sometime the company cash flow may be affected temporary which does not show the 15%, we cannot just write them off but need to understand why the cash flow to equity drop.
roger that. thanks!
Please login or Register to submit your answer