Page 4 - Evaluation - The Studies continued [3
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Altering the Trend Line
Altering the Trend Line and evaluating the resulting
configuration is the primary means for identifying trends in the data. In the Study below (copied from the last page), the very
steep slope of the Trend Line (due to the high rate of Growth), may not seem to
be a realistic indicator of the growth trend for this data.
The high growth
rate average seems to have been unduly influenced by the higher than normal growth experienced in the years from 1993 through
1995. Whereas the data from fiscal years 1995 and 2002 may be a better indication of a trend that has a likelihood of continuing into the
future. If these assessments seem reasonable, adjustments need to be made in
the Trend Line so that it's location reflects it's title - 'Trend Line'. There
are a number of ways that this can be accomplished.
First,
because it appears the first three years of the line graph are out of sync with
the rest of the graph, reduce the number of years being displayed from eleven to
eight using the Up/Down arrows to the left of the Years of History label. Next
click the Centering control button. Now, as you can readily observe in the
revised image below, the Trend Line looks more like what it represents - a
sustainable trend. If the user feels that further adjustments are warranted, minor
adjustments may be made using the Up/Down arrows controlling the Growth rate and
vertical location of the Trend Line.
Take
note, that as
the Trend Line changes, the values adjacent to the yellow dots also change.
Being a Sales Study, these numbers are the projected Sales for future fiscal
years. Based on the Trend Line's position, the projected Sales for the fiscal
year ending in 2003 would be 7.9, for fiscal year 2004 it would be 9.1. These
projected values are used in the 'Future Projections' feature of Equity
Evaluator, which will be looked at more closely when the individual Studies are
examined later.
Return
the Study to it's initial appearance by following the steps outlined below:
Another
approach may be utilized to evaluate the Sales data. Enter a lower
Growth rate in the Growth rate text box (say 15%), click the Redraw
button. then lower the Trend Line using the appropriate Up/Down control:
The
results using this second methodology will be similar, but not
identical to the results using the first method, but are no less significant.
Evaluating a Stock by any means is a subjective process, there is no absolutely
correct method.
Help
Each of the
four Studies has 'Help' listed on the menu, click on it and the following two
choices will appear on the drop down menu: 'Controls & Values' or 'Graph
Elements'. As a general note, the user is reminded to make use of 'Tool Tips',
by pausing the cursor over a control or input item, a brief description of the
item will appear. For a more detailed description, use the features discussed
below.
Controls & Display Values
Click this
choice on the menu and the tabstrip shown below appears. There is a tab for
each of the controls that appear on the tool bar below the page menu.
Clicking a tab will offer a brief description of that control, much like the explanations
already discussed in the Controls section of this web.
Graph Elements
When this
second alternative under 'Help' is clicked, another tabstrip appears. Each tab
displaying a small section of the graph element described. Again,
the explanation presented when the tab is clicked is similar to the description
offered in the Graph Elements section discussed earlier.
