Not exact matches
One way to control sky - high C - suite pay packages is to base compensation on better
metrics than just
stock prices
Furthermore, as of October 2017, European
stocks remained generally less expensive
than US peers on
metrics such as
price - to - book and
price - to - cash - flow.
The cyclically adjusted
price - to - earnings ratio, which is a favorite
metric of Nobel Prize - winning economist Robert Shiller, suggests
stock prices are higher
than any other time in history other
than the dot - com bubble of 2000.
Knowing how
stocks are
priced historically relative to some
metric like earnings or cash flows is far more instructive
than knowing whether
stocks are at an all time high or not (we've addressed the predictive utility of
stock valuations in several posts, including here and here).
Stocks were sold if any of the valuation
metrics listed above exceeded 25 % of the sector median, if the three - month
price momentum turned negative, or if the
stock surprised negatively by more
than 5 %.
An additional benefit of using dividends in evaluating a company is that since dividends only change once a year, they provide a much more stable point of analysis
than metrics that are subject to the day - to - day fluctuations in
stock price.
If the Board were to apply the same valuation
metrics to its own
stock as it did to the recently completed acquisition of Alliance Systems Inc., they would undoubtedly conclude that at these
price levels the Company's shares represent an equal or greater value
than Alliance Systems.
I have learned this lesson the hard way, missing out on a
stock that was falling, and the
metrics looked good, but I bid a lower
than market
price thinking it was going to drop to my
price, but then of course, it turned, and never looked back... being stubborn I did not raise my bid until after it was no longer appealing to me.