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P/E Ratio or Price-Earnings Ratio:
An indicator of how highly a share is valued in the market. Arrived at by dividing the closing price of a share on a particular day by the earnings per share(EPS). The ratio for companies in an industry group is often given in investment journals like the CAPITAL MARKET. A high P/E ratio, however, does not necessarily indicate a bright future for the company; share prices of closely held companies aresometimes pegged at very high or low levels, and since these are seldom traded, an unrealistically high or low P/E ratio can be sustained over time. A lowP/E where the earning per share is high, often indicates that a share is underpriced.
PAT:
See PROFIT AFTER TAX.
P\D Ratio:
Price-dividend ratio; price dividend by last dividend; Measures the value of an investment.
Pac-Man Defence:
A strategy of survival in the takeover game, named after a popular video game in the US in the early 1980s, in which a character which does not swallow its opponents is itself consumed. In a typical Pac-Man defence a target company in a takeover bid will threaten to take over the acquirer and start buying its shares.
Paid-Up Capital:
Capital acquired by selling shares to investors, as distinguished from capital accumulated from earnings or from secured or unsecured loans.
Paid-Up Share:
A share whose issue price has been paid in full. In the Indian new-issues market seldom do companies ask for the share price in full with the application. Often it is half with the application, and the rest on allotment. Sometimes,however, when the price is high, there may be part payment with application, part on allotment, followed by one or two calls. The last call, before the share is fully paid up, is the final call.Partly paid shares are traded in the market. The buyer then has to respond to subsequent calls.
Panic:
The First Law of Disciplined Trading in the stock market is: Don't panic; but if you do, be the first.
Panic Selling:
A condition of the stock market in which not only inexperienced investors, but also sturdy bulls, take fright and start selling. It may be caused by sudden unfavourable news or rumour, or a RANDOM WALK by shares downwards, or simply, in bear market conditions, the absence of financial institutions from the market.
Paper Loss:
A loss which remains only on paper, because the investor hasn't really sold his shares bought at a higher price. A poor consolation, for the share prices may go down further till the investor has to sell at a much greater actual loss.
Paper Profit:
A profit which remains only on paper, because the investor hasn't sold the shares which have appreciated in price. The only real profit on the stock market is booked profit, i.e., profit made on shares actually sold.
Paper Trade:
Another name for managing a DRY RUN PORTFOLIO.
Par Bond:
A financial instrument or a security which is bought and sold at its face value, and not at a discount or premium.
Par Value:
The face value, or the price of a share, debenture, or bond that is paid for the year.
Parent Company:
A company which owns or controls subsidiary companies by means of owning a majority of voting shares. A parent company usually has a business of its own. See HOLDING COMPANY
Pari Passu:
Ranking equally. After CONVERSION from debentures, the new shares created carry the same rights as the other shares of the company to receive dividends, rights and bonus shares, and to participate in the company's profit and loss.
Parking Shares:
Placing one's assets in safe investments while alternative investment opportunities are being considered, or while the stock market is unfavourable for fresh investments. See, however, SHARE PARKING, for quite a different meaning.
Partial Delivery:
A situation in which the broker does not deliver the entire quantity of share ordered by an investor. If the investor has placed an order for, say 500 shares, in partial delivery the broker will deliver 400 or 300.
Partly Active Shares:
Shares which are bought and sold infrequently. say once every fortnight on an average, are partly active. They are not easy to buy and sell and the SPREAD between buying and selling prices can be large.
Partly-Paid Share:
See PAID-UP SHARE.
Passed Dividend:
Skipped dividend or omitted dividend, i.e., dividend not paid for the year.
Patavat:
Exchange of deliveries in cash shares.
Pathfinder Prospectus:
An exploratory prospectus for a new company, which seeks to find out if the market will subscribe to the issue of shares. It is detailed than the actual prospectus which must satisfy conditions of full disclosure. Financial and pricing details may be omitted from the pathfinder (known in the USA as red herring).
Payout Ratio:
This is dividend per share divided by earnings per share and the sum multiplied by 100. If the payout ratio is 40%, it means that 40% of the company's profits after tax have been distributed as dividend and 60% transferred to reserves. A very high dividend payout may not be healthy, as it will slow down the building up of an adequate reserve. When a companyhas more than enough reserves, it can always reward the shareholders by issuing BONUS shares. Also called DIVIDEND COVER.
Pegging:
Stabilizing the price of stocks, currency, commodity or gold through intervention by the government or government controlled agencies which buy when the price falls below a certain level and sell when the price crosses a healthy level. In the stock market it is the Unit Trust of India which usually performs this function.
Pennant:
A term used in TECHNICAL ANALYSIS when a chart pattern resembling a pointed triangular flag emerges. This happens when successive peaks and rallies become less pronounced until these almost disappear. Not only are price fluctuations less pronounced, the volume of business also falls. A pennant formation signals an imminent rise or fall, but which, the technical analysts are unable to predict.(Page no.143 Graph).
Penny Shares:
Shares with a very low market price, often bought by small investors because, since these are low-priced, a large number can be acquired, and even a small price rise represents substantial price appreciation, e.g., if a three-rupee share rises to five rupees, the capital appreciation is 66%. Investors who buy these, believe that a sufficiently low point has been reached and there is not much downward risk. On the other hand, if the company recovers, there is a lot to be gained.
Perfect Competition:
A theoretical market condition in which no buyer or seller has the power to influence the price. Perfect competition is said to prevail in a stock market in which the investors equally share all the information available and there are large numbers of them buying and selling.
Perfect Efficient Price:
A price of a share which exactly corresponds to its value. A perfectly efficient share is one whose value is always perfectly reflected in its price
Performance Stock:
A share which has shown a high growth over a short period. Also known as growth stock. Usually the dividend payout in these shares is not spectacular, as the earnings are retained to finance their rapid growth.
Pivotal Shares:
Although all shares are exposed to SYSTEMATIC RISKS, the effects of such risks on pivotal shares greatly influence the stock market. Shares of some blue chip companies act as a pivot on which the market is balanced; if they turn bearish the market follows; if they turn bullish, the market looks up. Shares of TISCO, TELCO, ACC, ITC, Hind Lever, etc., belong to this class. If, however, any of these is affected by unsystematic risk, such as a labour strike or price control or decontrol, the share's rise or fall is not going to affect the market.
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