Investors are awaiting the financial reports of the companies for the first half of 2008, which will give a better picture of their development against the backdrop of capital market's slump since last October.
The indexes of the Bulgarian Stock Exchange (BSE) have lost over 40% since the beginning of the year, which resulted in a considerable improvement in terms of their P/E ratio.
The R/E ratios of the stocks included in the calculation of the broader BG40 index marked a considerable decline based on the profit of the companies in the last four quarters, for which data is available, as a result of the slump in stock prices.
The financial indicator may decline further if the companies included in the calculation of the BG40 post increase in profits in the second quarter of the year.
The average P/E ratio of the companies included in the BG40 stood at 16.9 as at July 22, 2008.
See the table for more details on the P/E ratios of BG40's stocks:
|Albana Invest Holding||10,25||5,35||0,4|
|Bulgarska Roza Sevtopolis||1,8||14,89||1,2|
|Bulgarian Holding Company||5,5||-||0,7|
|Doverie United Holding||5,21||6,23||0,6|
|Industrial Capital Holding||7,9||65,32||1,9|
|Industrial Holding Bulgaria||6,01||12,41||0,8|
|Odessos Shiprepair Yard||218||19,58||2,4|
|Lead & Zinc Complex||33,7||28,66||4,1|
|Bulgarian River Shipping||4,4||22,05||3,4|
|Stara Planina Hold||4,8||11,53||1,9|
|Corporate Commercial Bank||91||20,23||3,3|
|First Investment Bank||6||11,76||1,9|
|Central Cooperative Bank||4,04||16,28||1,6|
* Data courtesy of Karoll
The distortion of the P\E ratios of some of the companies may be put down to the fact that the results calculated on the part of the profit also include one-off revenues and costs.
With some of the companies, especially holding companies, the sales of financial assets, which are a one-off revenue, as well as other accounting operations, such as the revaluation of assets, boost artificially the results, which makes the P\E ratio lower.
It is good for investors to follow the operating revenue of the company and the operating profit, as well as the revenue growth, which would provide a more realistic judgment. A low P/E ratio does not guarantee that the stock of the company is cheap.
The fact that a company sold assets and booked profit is not a reason to believe that the stock of the company should be bought as this profit will not be there in the next reporting period.