Coming to terms: Multiple, 8-K report
The Motley Fool
Q: What is a stock's "multiple"?
A: "Multiple" usually just refers to a stock's price-to-earnings ratio (or P/E).
You get a multiple by dividing a stock's price by something, such as earnings (via the P/E ratio) or revenues (via a price-to-sales ratio).
Imagine a company's stock that is trading at $30 per share.
It earned $2 per share over the past year, so its P/E is 15 (30 divided by 2 equals 15). You might refer to it as trading at an earnings multiple of 15.
If you read analyses of various companies, you'll see references to price-to-sales multiples, book-value multiples, cash-flow multiples and more.
It's instructive to compare a company's various multiples with those of its peers, to see whether its stock appears to be undervalued or overvalued.
FedEx, for example, recently sported a P/E of 14, while United Parcel Service's was 20.
That suggests that FedEx is the better bargain, though ideally you'd want to assess other numbers as well.
Q: What's an 8-K report?
A: The Securities and Exchange Commission (SEC) requires companies to file 8-Ks whenever certain special events have occurred since they last filed their comprehensive annual 10-K report.
The kinds of happenings that necessitate 8-K reports are those that have a significant impact on a firm's performance or financial health, such as mergers, layoffs, plant closings and court awards or penalties.
To see if any 8-Ks have been filed lately for a company you're following, look up its SEC filings at sec.gov/edgar/searchedgar/webusers.htm.