So, what does it all mean?
Because the SSG is designed to help an
investor make a reasonable projection using
historical data, the figures from the past
five years in this chart can be very helpful
in evaluating a company's stock.

First, look at the high and low prices
for the past five years (in Columns A and
B). Ideally, you'd want to see both trending
higher from year to year (also taking into
consideration the most recent year's high
and low prices on top of the chart). If
the stock's price hasn't increased very
much over the past five years, you may
have reason to doubt that it will increase
at a greater rate over the *next* five
years.

The trading range within a year can also
give you an idea about a company's price
volatility. If the span between the high
and low prices is consistent from year
to year, or if the difference between the
high and low price is similar every year,
then this may provide a clue about the
likelihood that the stock will trade in
a similar range in the future.

Though these measures are not critical
to the SSG analysis, it's a good idea to
review the price data and be aware of how
the stock has performed in the most recent
five years.

You've already seen a graphic representation
of the company's earnings per share on
Page 1 of the SSG, but it can be handy
to see the actual numbers here in Column
C as well. In a company that doesn't pay
dividends, you should be looking for a
doubling of earnings per share over the
next five years, in order to ensure a 15%
return on your investment. So wouldn't
it make sense for that company to have
doubled earnings in the last five years
too?

Of course, earnings aren't the whole story
when you're considering the purchase of
a stock--there may be possibilities of
P/E enhancement (if the P/E at the time
of purchase is lower than average, and
subsequently returns to an average level,
the price will reflect that change) and
the impact of dividends. But a simple doubling
of the EPS from five years ago compared
to the most recent year is a quick and
easily quantified double-check of how wide
from your mark the company has been.

As with the high and low prices, the high
and low P/E Ratios should be reviewed to
see that no downward trends exist. It may
be helpful to think of the stock's P/E
Ratios as a proxy for its price, year by
year. As the company's earnings grow, so
too should its price, and if both did so
evenly, the P/E Ratios would be exactly
the same from year to year. However, other
factors like investor sentiment and the
laws of supply and demand will cause the
price to fluctuate. The P/E Ratios of the
past will tell you how stable the company's
stock price has been in comparison to its
earnings. If the P/E Ratios have been decreasing,
that may be a danger signal. If the P/E
Ratios have increased somewhat or remained
the same, there's probably not much to
worry about.

Columns D and E provide the raw data for
one of the most important assessments of
a company's value that *isn't* on
the SSG! It is Relative Value, the comparison
of a stock's *current* P/E ratio to
its *average* P/E ratio. This figure
is usually displayed as a percentage, and
ideally is less than 100% (meaning that
the stock's P/E ratio is lower than its
average). To calculate Relative Value,
divide Field 9, Current P/E Ratio, by Field
8, Average P/E Ratio.

You can compare the Current P/E ratio
to the P/E ratios over the last five years--if
the current P/E is at the low end of the
range, the stock may be undervalued or
fairly valued (assuming of course that
its growth potential is strong). If the
P/E ratio is at the high end of its five
year history, that may be a signal that
the company is temporarily overvalued.
If the company's current P/E ratio is even
lower than its average P/E ratio, it may
be a good sign for a bargain shoppers that
a sale is in progress!

The dividend and payout section
is not usually much of a concern for investors
looking for stocks with the maximum potential
for capital appreciation. Still, dividends
can provide the extra "kicker" to allow
the stock's total return to exceed 15%
over time.

You should consider if any trend in the
dividend or payout ratio exists. If the
company has been growing its earnings over
the past five years, then the dividend
should also be growing. If the payout ratio
is very high, the company may not have
enough capital to invest in itself.