On 12 February 2013 the eagerly awaited annual results of Barclays PLC will be published.
But how good are they going to be? Some brokers are estimating profit to be as high as £6,909m. But even if this is achieved, how good is this really?
Earnings Per Share
We need to look at earnings per share and the company’s retained earnings.
Companies are only allowed to pay dividends from current year and retained earnings from before. This measure enshrined in the Companies’ Act prevents riskier organisations from borrowing to pay dividends in order to inflate the share price.
Last time In the year ended 31 December 2011 Barclays reported a profit before tax of £5,879m and attributable to shareholders of £3,007m giving earnings per share of 25.10p. From this they paid an imminently affordable 6p per share dividend.
Before the crash, year end results for 31 December 2007 gives an EPS of 68.90p, from which a dividend of 34p was paid, approximately half of the year’s earnings.
CEO Anthony Jenkins has his work cut out as profits need to rise by a further 170% to regain their former levels. In the meantime however there is plenty of scope to increase the dividend to long suffering shareholders.
Net Asset Value
N.A.V. is how much the shares would be worth if the business was broken up and the component parts sold at auction for hard cash. Auditors are required to value a companies assets at their net realisable value or cost which ever is lower.
Therefore on the Balance Sheet we need to locate the total of the assets from which we subtract its debts, known ‘liabilities’ to arrive at the net asset value. This then is divided by the number of shares in issue, which can be found in the notes to the Balance Sheet in the depths of the annual report.
One can then compare the N.A.V. per share with the current market price.
Freshly equipped, the investor can now tackle the thorny question of whether to buy more shares, hold on with the ones he has got, or sell.