Buying a share means buying a share of the property and therefore of the capital of a joint stock company. A shareholder, or shareholder, owns a portion of the overall share capital of the company, with all rights and obligations. Shares are therefore a form of investment for which the investor participates in risk capital and becomes a shareholder. Thus, while being able to obtain higher yields than in bonds, it is exposed to uncertainty and therefore to greater risks.
Shares can be listed or unlisted. The Italian shares are listed on the Italian Stock Exchange, which is one of the main European stock exchanges that also deals with the admission and exclusion of financial instruments and traders from trading, also manages and supervises the trading and obligations of traders and issuers. The Italian stock markets are: the MTA, electronic stock market, where shares, convertible bonds, option rights and warrants are traded; the AIM Italia which is dedicated to small and medium enterprises (SMEs); the MIV dedicated to Investment Vehicles.
The objective of the companies that issue shares is linked to obtaining the financial liquidity necessary to make investments and to develop the corporate activity, offering the shareholder the possibility of receiving a share of the company profits through the payment of a dividend which adds up any performance deriving from the performance of the shares on the market.
The dividend is therefore a partition of the profit which is established and distributed by decision of the Shareholders' Meeting at the end of each financial year to remunerate the shareholders' capital. The shareholder is a partner and therefore must carefully assess the risks associated with the company's economic activity, bearing the risk of a possible depreciation of the value of the share and therefore of capital losses and the value of the shares held.
Among the rights of the shareholder we have already indicated the receipt of dividends, where distributed by the company, and to this we must also add: – the possibility of casting one's vote in the shareholders' meetings; – the possibility of examining certain corporate books; – the possibility of challenging invalid shareholders' resolutions.
The shares can be of various types: 1) ordinary shares: they guarantee the right to vote in ordinary and extraordinary shareholders' meetings; 2) savings shares: they do not confer any voting rights but offer a higher dividend than ordinary ones; 3) preferred shares: give the right to vote in extraordinary shareholders' meetings and are "privileged" in the distribution of profits. Preferred shares are currently increasingly rare.
Natural persons (or even companies) who want to buy or sell securities must contact authorized intermediaries, banks and stock brokerage companies (SIM), which will enter the purchase and sale orders of shares on their behalf in the telematic trading systems .
Indicators and stock valuation - Shareholders choose different approaches in risk assessment and can get help from some detailed references given by the use of: 1) technical analysis: focuses on the analysis of graphs and representations of specific indicators that allow to support a portfolio strategy more linked to trading logics and therefore to a more opportunistic investment compared to a typical approach of the "drawer-owner", who thinks on a medium-long term perspective; 2) fundamental analysis: deals with studying the economic data of companies and thus makes it possible to contextualize the balance sheet results within the sector to which they belong and the economic reality of the country/ies where the company's production activity takes place.
The most used profitability indicators are the following:
EBITDA – These are profitability indicators, which can be found in the company's financial statements, which are very important when one wants to evaluate a company and therefore a share-type investment in it. EBITDA stands for the acronym Earnings Before Interests Taxes Depreciation and Amortization or "Earnings before the allocation of items of interest, taxes, depreciation and depreciation in the financial statements"; in short, it corresponds to the concept of gross operating margin and helps to frame the scope of corporate profitability and to compare it with that of similar companies having a neutral parameter. The comparison must take place on the basis of similar or standard accounting and legal systems between countries and for companies in the same sector and which does not consider the weight of taxes and interest, as well as extraordinary provisions for non-performing debts or restructuring costs, the assessment of company management may be incorrect.
CAPEX (Capital Expenditures) – It is a measure that represents the outgoing cash flows, dedicated to investments in fixed assets of an operational nature, i.e. investments in fixed capital. It can be found in the financial statement and represents the company's effort dedicated to expanding, and therefore improving, making production capacity more efficient.
P/E (Price/Earnings or Price/Earnings ratio) – It is the ratio between the price of a share and the expected profit for each share itself. Once the trend of the sector to which the company belongs has been framed and information about future trend forecasts has been acquired, this report allows us to frame the correctness, or rather the consistency, of the share price with what has been analysed. A standard measurement is considered equal to 15 and therefore if the security has a higher value which is positioned between 25 and 30 it is considered that the action is overvalued. The more competitive the industry, the more the value tends to be close to or below the standard. The current P/E values of the shares tend to be high also thanks to the absence of inflationary tensions.
ROE (Return on Equity), ROA (Return on Asset), ROI (Return on Investment) – These are fundamental indicators for understanding whether the company is creating wealth and therefore the possibility of attractive returns for the investor. They are balance sheet ratios that offer a glimpse of the profitability and economic efficiency of the company's activity, whether it is the ratio between net profit and equity capital, or the ratio of the same towards total assets, or towards total assets. net investments (Total net assets less any extra investments not related to the business activity). The parameters evaluated in their historical trend which offers a reading of the company trend must then be compared with the ECB interest rates for the appropriate evaluations, and therefore with the average cost of money in force. An increasing common trend higher than competitors demonstrates better operational management.
Cash flow or FCF Free cash flow – Very interesting indicator for shareholders: it can be deduced using part of the concepts explained above. It refers to the difference between cash flow from operating activities and cash flow from fixed assets, and therefore the possibility of self-financing or cash available to a company. FCF = (EBIT + depreciation and working capital) – CAPEX. The assessments that are made on the cash flows at various levels refer to the consistency between them and the weighted average cost of capital, particularly in a scenario of low interest rates and widespread liquidity where recourse to new liquidity becomes interesting when discriminated from the cost of its supply.
