Revenue Per Share Comparison Between 5 Big Canadian Banks

To find the revenue per share of a company, do the following

1.) Go to: http://money.ca.msn.com/investing/
2.) Enter the ticker symbol of your chosen company in the “Name or Symbol” field (note “.to” is not required because Canada is listed as the market already)
3.) Click on Highlights under the Financial Results header in the left tool bar
4.) Revenue per share is listed fifth from the bottom in the table displayed.
5.) Repeat for each of the five companies selected, and add it to the table of info:

Company
Net Profit Margin (last 12 months)
Earnings Per Share
Revenue Per Share

Royal Bank of Canada (RY)
13.60%
2.56%
20.68

Toronto-Dominion Bank (TD)
16.39%
3.49%
19.88

Bank of Nova Scotia (BNS)
25.32%
3.32%
14.23

Bank of Montreal (BMO)
16.84%
3.29%
19.28

Canadian Imperial Bank of Commerce (CM)
12.04%
2.65%
25.97

A couple of observations:
1.) RY, TD, and BMO have pretty much the same amount of business activity taking place
2.) BNS has significantly less activity taking place, while CM has significantly more
3.) BNS, with the lowest revenue per share, has the highest net proft margin
4.) CM, with the highest revenue per share, has the lowest profit margin
5.) The ranking of the bank in the revenue per share automatically places it in the opposite ranking in the net profit margin category.

What does this mean to my investment decision? Net profit margin trumps revenue per share, so the revenue per share data will be dropped from this particular comparison moving forward.

Revenue/Sales Per Share

Revenue (or sales) per share is a measure of the revenues (sales) a business made over a period of time, divided by the number of shares outstanding.

English: Revenue/share is used to analyze the amount of activity taking place in the business, relative to the number of shares outstanding. The higher this number is, the more business activity taking place. Revenue per share can vary a lot between businesses.

For a more detailed description, go to: http://www.investopedia.com/terms/s/salespershare.asp
Tomorrow we'll find the most recent earnings per share for each of the five big banks we're comparing.

Earnings Per Share

To find the earnings per share of a company, do the following:

1.) Go to: http://money.ca.msn.com/investing/

2.) Enter the ticker symbol of your chosen company in the “Name or Symbol” field (note “.to” is not required because Canada is listed as the market already)

3.) Click on Highlights under the Financial Results header in the left tool bar

4.) Earnings per share is listed fourth from the bottom in the table displayed.

Repeat for each of the five companies selected, and add the data to the table from Monday's blog:

Royal Bank of Canada (RY)
Net Profit Margin 13.60%
Earnings per Share 2.56

Toronto-Dominion Bank (TD)
Net Profit Margin 16.39%
Earnings per Share 3.49

Bank of Nova Scotia (BNS)
Net Profit Margin 25.32%
Earnings per Share 3.32

Bank of Montreal (BMO)
Net Profit Margin 16.84%
Earnings per Share 3.29

Canadian Imperial Bank of Commerce (CM)
Net Profit Margin 12.04%
Earnings per Share 2.65

So, if I was investing based on earnings per share only, TD would be my number one choice, followed by BNS.

If net profit margin and earnings per share were equally weighted, BNS would be my number one choice (ranking 1st and 2nd for net profit margin and earnings per share respectively), and TD would be my second choice, ranking 3rd and 1st respectively.

But you guessed it! If picking stocks was this easy, it wouldn't be much of a hobby or an activity. Tomorrow in hobby investing – revenue per share......stay tuned!

Earnings Per Share

Once I know a business is profitable, I look at the:

1.)Earnings per share
2.)Revenue per share
3.)Price/earnings ratio
4.)Return on equity
5.)Book value/share
to inform my investment decision.

Earnings per share is the amount of money a business earned over a period of time, divided by the number of shares outstanding.

English: The bigger the better. The more a business is earning, the more successful it is. Earnings per share should also be increasing over time.

For a more detailed definition, go to: http://www.nasdaq.com/reference/dozen/earnings-per-share.stm

To see if the earnings per share is increasing over time, go to the businesses web page. Every publicly traded company should have a link called Investor Information or Investor Relations, or something like it. Click on it. If you can't find it on the home page, do a Google search for "company name investor relations".

Select financial information, statements, income statements, or annual reports (usually a PDF document, and may exist for previous quarter, years, etc.). Find the income statement. Locate the last line item (or close to the last), and it will be earnings per share.

It's important to note that, even though numbers seem like the are pretty concrete measures, they aren't. Businesses have the ability to make assumptions, and make their own formulas that will result in numbers that look great. They know what numbers investors are looking at, and they want them to look good. That's why the more information you can look at, and them more questions you can ask about a company, the better the chance that you'll choose a company that'll make you some cash.

I digress.

Tomorrow we'll find the most recent earnings per share for each of the five big banks we're comparing.

Finding the Net Profit Margin for a Company

Finding the Net Profit Margin for a company is just 8 simple steps away!

1.) Go to the MSN Money Site: http://ca.moneycentral.msn.com/investor/common/find.aspx
2.) In the “Enter name:” field, type in your ticker symbol
3.) Select “Type of Symbol” radio button “Stock”
4.) Select Country from the drop down arrow (Canada)
5.) In the left hand tool bar, under the Financial Results header, click “Highlights”
6.) In the “Name or Symbol” field, enter your ticker symbol (i.e. BMO)
7.) Click on “Go”8.)Financial Highlights are listed. Net profit margin is the 3rd row.

Repeat steps for each of the five companies you are comparing.

Company
Net Profit Margin (last 12 months)
Royal Bank of Canada (RY)
13.60%
Toronto-Dominion Bank (TD)
16.39%
Bank of Nova Scotia (BNS)
25.32%
Bank of Montreal (BMO)
16.84%
Canadian Imperial Bank of Commerce (CM)
12.04%

So – if I based my investment decision on Net Proft Margin only, Bank of Nova Scotia would be my number one choice followed by the Bank of Montreal.

However, net profit margin (obviously) isn't the only number I make my investment decision on, but it's a good starting point, and a good way to confirm that indeed, the business I want to buy is actually making money.

For more information about Net Profit Margins, and how they are calculated, go to: http://beginnersinvest.about.com/od/incomestatementanalysis/a/net-profit-margin.htm

Net Profit Margin

To date, I've taken the following steps:
1.)Chose an industry
2.)Identified the 5 largest companies in that industry
3.)Identified the ticker symbol for each of those 5 companies

The next step, regardless of industry, regardless of business size, and regardless of how a business makes money, is to find out if they're making money. One indicator if a company is making money is their net profit margin.

Net profit margin is the percentage of a business' revenues that are actually profits. For example, when I buy a new shirt for $20, that $20 is broadly broken down into the following:

Fabric and labour $10
Shipping $1
Marketing $2
Business Price of shirt(Fabric and labour plus shipping plus marketing) = $13

Net Profit Margin = (Business Price of Shirt – Cost)/Cost
= ($20-$13)/$13
= 54%

For every $13 that the business spends on shirts, they make $7.

Three things to know about net profit margins:
1.)A positive net profit margin means the business is making money.
2.)A negative profit margin means the business is losing money.
3.)The higher the profit margin, the more money the business is making.

Next blog will give step by step instructions for how to find the net profit margin of a company.

The Ticker Symbol

Once I've narrowed my choice of company down to 5 companies, I need to find the ticker symbol for each of the companies that I need to follow.

The ticker symbol is the key to all things financial associated with the company.

To find the ticker symbol, I go to Google Finance at http://www.google.com/finance
There is a tool bar at the top. I type the name of each of the top five companies that I am interested in.

When I type in Royal Bank of Canada, 73 companies come up. Whoooaaa....a little intimidating, good thing you have a coach to guide you through these murky waters:)

Examine the column labelled “Exchange”. The companies that are traded on the Toronto Stock Exchange are listed as “TSE” in the Exchange column.

Typically, the ticker symbol you are searching for will not be followed by a dash. Just the straight goods – letters.

So, I see that the Royal Bank of Canada is represented by the symbol “RY”

Repeat these steps to find the ticker symbols for Toronto Dominion, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce.

Now, see if you were correct:

Toronto Dominion = TD
Bank of Nova Scotia = BNS
Bank of Montreal = BMO
Canadian Imperial Bank of Commerce = CM

The same ticker symbols may be used to represent the company on multiple exchanges. You'll note that Toronto Dominion is also traded on the New York Stock Exchange. In situations where the same ticker is traded on more than one exchange, it needs to be differentiated. To do this, the ticker symbol is followed by “.to”

For example TD.TO means Toronto Dominion bank on the Toronto Stock Exchange.

Your world is about to get very exciting!

Directing the Investment Focus

A month ago, I had $5000 to invest. I decided to buy stock through my tax free savings account (TFSA). The beauty of this is that any gains I make are TAX FREE!!!

My strategy for investing combines personal preference, current events, and research.

My personal preference is the financial sector. Canadian banks managed to weather the storm of the economic crisis for a number of reasons, but the fact that they stayed afloat makes them a gem in the financial rough.

Current events tell me that other countries are looking to Canada as an example of a successful financial model in a greedy, changing and turbulent world. The G7 finance ministers met in Iqaluit, Nunavut, Canada to talk business. Toronto is developing and marketing themselves as a global financial hub.....and the list goes on. By the way, this is information that I learned from watching BNN, National news, and reading newspapers.

Now I want to narrow my focus by doing research. The first step: I want to find the five largest banks in Canada (remember, the larger the company, the lower the risk). A simple Google search of “5 largest banks in Canada” brings up (surprise Wikipedia): http://en.wikipedia.org/wiki/Big_Five_(banks)

Here I find that the five largest banks in Canada are:
1.) Royal Bank of Canada
2.) Toronto-Dominion Bank
3.) Bank of Nova Scotia
4.) Bank of Montreal
5.) Canadian Imperial Bank of Commerce

There, the hardest part is over. Choosing an industry and narrowing it down to the top 5 leaders. The point I want to make here is that there are a million companies to choose from, and this is where it's easy to get overwhelmed with information. There's so much of it out there. I use the simple steps above to direct my focus.

Hobby Investing in the Toronto Stock Exchange

The number one rule of hobby investing is that it's only a hobby if it's money that you can afford to lose. Although I'm a conservative hobby investor, I've bought a couple of companies that I would have been better off leaving alone.

The second rule of hobby investing is be clear on your numbers. Most banks in Canada charge $28.95 plus 3 cents per share for a buy, and charge $28.95 for a sell.

So, say I have a spare thousand bucks that I want to start investing with. I know that $57.90 is gonna be taken off the top just to buy and sell the stock ($28.95 * 2). If the share price of the company that I want to buy is $25.00, and I buy 37 shares of the company, that's gonna cost me an additional $1.11 (37 shares * $0.03).

$57.90 plus $1.11 = Fees for buying and selling the stock = $59.01
37 shares at $25.00 for the stock itself = $925.00
Total for the trading fees and the stock is $984.01

Remember that you have an actual $925.00 invested. If the price of the stock rises 7 percent (from $25.00 per share *1.07 = 26.25), then you've earned $64.75 ($925.00 * 0.07). $64.75 is just enough to cover the cost of buying and selling the stock.

A 7 percent gain is pretty big, especially when you're investing in large companies.

The more you have to invest, the more profitable a hobby it becomes because your buying and selling fees don't change too much, regardless of the amount you invest.

Let's look at the same example above if you have a spare $5000 to start your hobby (a nice way to use your tax free savings account because all the gains are tax free).

Number shares you can buy = $5000 (spare cash) - {$57.90 (trading fees) +(0.03 price per share commission fees)($25 share price)}= 197
Trading fees = $57.90 (trading fees) plus 0.03*197 (number shares to purchase)= $5.91 = $63.81
Actual Stock Purchase = 197 * $25 = $4925

Trading fees plus stock purchase = $63.81 + $4925 = $4988.81 (you have $11.19 cash to spare from your original $5000)

Now you have $4925 invested in the actual stock.

If the stock price goes up 2%, you've earned $98.50 ($4925 * 0.02), more than your trading fees, and anything above $25.50 is a capital gain for you (versus the $26.25 that you need to break even on a $1000 investment).

If math isn't your strong suit, don't worry, I'll post the actual break even forumla so you can just plug your numbers in to make your hobby investment decisions.

Have a great Family Day watching the Olympics Canada!

The Patient Investor

Hobby investing, like life, is best experienced when you're willing to wait for great things to come to you. Avoiding investing knee-jerk reactions is one of the best skills you can develop.

Choosing a company to invest in isn't a race. It's human to want to get the ball rolling as fast as possible (particularly if you are under the age of 30), but grab the reins on your need to act. In the long run, you'll be glad you took the time to invest right. After all, there are hundreds of opportunities in the market EVERY DAY!

It's time to start getting excited. You're one step closer to starting a new hobby that will change your world!!!

Deciding on the Numbers Before you Make the Investment

Once you've chosen a large company to invest in, you should set quantitative targets. The price at which you'll sell the company, and the amount of time you'll keep your money in the company before moving on to the next opportunity.

The strategy I use is to sell a stock is when it's made a 3-5% gain. I don't like to sell large companies at a loss, because it's been my experience that they make a comeback. However, when my investment has dropped 8 - 10%, especially if it's a large company,I sell. Whatever the target is, it's good to determine the amount of money I want to make before I hit the "BUY" button.

The second target to measure is time. For example, if you're still even after one month, and haven't made your 3-5% gain, will you continue to hold this inactive company at the risk of missing an opportunity somewhere else?

My rule of thumb for Toronto Stock Exchange investing is to give a company three months. If it hasn't generated the 3-5% return by then, it's time for me to move on, usually around the price I bought it for, or in most cases slightly higher.

Choosing Large Companies

You're ready to become a hobby investor in the Toronto Stock Exchange. Hobby investors best start by investing in large companies because when you're starting out, you're learning, and there is a lot you don't know. When you buy big companies, you remove a tonne of risk. Big companies typically don't go bankrupt.

The first step to take as a hobby investor is to find companies that you want to invest in. You can do this based on the products and services you use and love, one you think is on the rise to market stardom, or one based solely on size.

The first two strategies for choosing companies allow your creative juices to flow. You can tap your creativity by watching the news, reading journals, reading the newspaper, searching the web, being an observant consumer, becoming an expert in a field.......the ways to tap your creativity in choosing companies is endless.

The third approach, choosing a company by their sheer size, is strictly data-based. No creativity required. No emotion involved. Here is the step by step process to choose a large company.

How To Find Large Companies on the Toronto Stock Exchange
1.) Cut and paste the URL to MSN Money Canada Stock Screener in your browser:
http://ca.moneycentral.msn.com/investor/common/find.aspx?company=CA%3aMFI.TO&nextpage=%2finvestor%2fquotes%2fquotes.aspx
2.) Locate the left hand toolbar header titled Find Stocks
3.) Click on Stock Screener (3rd link under the Find Stocks Header
4.) Click on the Market Capitalization drop down arrow
5.) Select As High As Possible
6.) Cleck Search Now
7.) The first Company Name listed is Royal Bank of Canada

So, now you have a list of 25 largest companies listed on the Toronto Stock Exchange. The majority of the 25 largest companies are in the financial and energy industry.

We'll take it from here next post.

Use Future Uncertainty to Make Money

Myth #5 for why people don't invest in the Toronto Stock Exchange: The Future is Uncertain.

You've heard it in your office, from your friends, and in the news, the only thing that is certain is change. New technology and global connectedness have made this true now more than ever.

But take a step back to think about it for a minute. Technology has made it easy to collect, analyze, and communicate data. That data is spread far and wide, and ultimately is used to as a marketing tool. Fear sells news stories, and in some cases it sells ideas, goods, and services too. Don't let the marketing strategy of the media rob your future. Use it to make money.

Big media stories are actually a bonus for the savvy hobby investor. Combinging current events with a few simple deductions about human behaviour and historical stock performace will have your portfolio growing more quickly than you could have dreamed. So stick around cause this is good stuff. I'll teach you how to take advantage ofusing media to choose stocks that will make you big returns.

You Have Time

We've almost dispelled the five myths for why most people don't invest in the Toronto Stock Exchange. Myth number four: time, actually the lack thereof.

We all have the same 24 hours a day, but we all spend those same 24 hours differently, and that is what determines how and why lives take the paths they do. People that spend at least some of their day taking small steps to acheive greater goal, move forward. Hobby investing moves lives forward financially.


My experience has taught me that it takes about 15 minutes to fill out an application for a direct investing account, 2 hours to decide if you want to buy a company, 5 minutes to buy or sell a company, and 20 seconds to check the performance of the company (a little longer for those of you out there that are connected to the Net via dial up).

So, for an investor that buys and holds a company for 6 months (because they're ready to sell since the stock price has gone up 20% in the past 6 months) that's 4 hours and 35 minutes a year to decide, buy, sell, and make a healthy 20% gain. Hmmmmmmmm.....do you still think you don't have time? You don't not have time to do something so simple to secure some financial bonuses for your future!!!

The Toronto Stock Exchange is Not Risky

So, the third reason why most people that I hang with tell me they don't invest because it's too risky. Investing in the market is anything but risky when you know what you're doing.

How do you eliminate the risk that could come with investing in the Toronto Stock Exchange? You don't get greedy. You buy big companies. Let me give a couple examples:

January 2007 January 2010 Percentage Gain
Potash Corp of Sask $51.47 $115.07 124%
Agrium $36.08 $65.81 82%
Research in Motion $52.50 $67.47 29%

Big companies come with very little risk. They make too much money to worry about them going from the top to the bottom overnight. So, get over it. Bite your fear, unless you want to look back on numbers like these and cringe at opportunity lost.

Compare that to the gain or loss of your financial portfolio to see where the true risk lies!

Have a great weekend!

Investing is a Learned Skill

Today we'll address reason numero deux of why people don't invest in the TSX and other markets.

They think they don't know how to make investment decisions or to buy stocks.

While you may not know right now how to make investment decisions, it doesn't mean you will never know how. You just haven't learned the skill yet. And it really is in your best interest to learn.

The skill of investing can be summed up into three main steps:

1.) choosing large companies
2.) Setting quantitiative targets before investing in a company
3.) Being patient

After we review the three remaining reasons why people typically don't invest as a hobby, or as a means of taking control of their financial future, or as a full time job(listed on Feb.2 blog), we'll get into detail about how to learn the three steps of the skill of investing.

Are you excited yet?

Trust Yourself When it Comes to Investing in the Toronto Stock Exchange

So, one of the most popular reasons that people don't invest in the Toronto Stock Exchange, or any other market for that matter, is because they don't trust themselves.

They leave their investment decisions, their future financial potential, in the hands of others that may or may not be really good at what they do - fund managers, portfolio investors, business analysts, financial planners, etc., etc., etc. Maybe I'm old fashioned, but I still believe that "if you want something done right, do it yourself" ~ maybe not so much in the case of manufacturing plastic toys in North America, but you get where I'm going here.

The fact is, and I really don't know how to stress this enough, you can make more informed decisions than pretty much anybody else when it comes to investing your money in shares of a company. Why? Well, because it's simple to make the right decision when you know how to make it (and you will), and because you have an extremely huge vested interest in it. Or at least you should. You have a lot at stake.

When you make your own investment decisions, you follow the profiles of you chosen FEW companies like you follow your favourite sports team, or the date of the release of the next Sex and the City movie. And you do this because it is plain fun.

Your portfolio manager, financial planner, etc. could never devote this much attention to a few individual companies because they have way too many customers. You only have one customer. And that's why investing in the Toronto Stock Exchange is such a super fun hobby for anyone and everyone.

One of my favourite investment information sites to follow is the Motley Fool. They can be found at: www.fool.com

I suggest you check this out to get a 101 on the inside life of hobby investors.

Reasons Not to Invest in the Toronto Stock Exchange

I am amazed by the reasons people cite for not investing in the stock market. I've boiled down the reasons that people don't invest to the following:

1.) They trust other people more than they trust themselves
2.) They think they don't know how to make investment decisions or to buy stocks
3.) They think it's risky
4.) They think they don't have time
5.) They're scared that the future is uncertain

You might recognize one of the above as a reason for staying out of the market too. That's why learning and education is the most valuable way to spend your time. Once you are educated (which you will be if you follow this blog), you'll know what to invest in and how to do it. And this will begin one of the most fun and productive hobbies of your life.

A little bit about me. I have a Master's Degree in Business Adminstration (MBA) and have been investing in the markets for about a year and a half. I do it because it's fun, rewarding, adrenaline inducing, and it has made me money. I want to share the fun with others, and I wouldn't mind retiring early either. That's another reason why it's great. You can continue to make a regular pay cheque at a day job until you earn enough money to pursue it full time, or live off the interest.