Investing in stocks: characteristics, valuation and profitability

On Enerfip, we often talk about investing in bonds. And for good reason: it's the most common type of investment on our platform! However, what you may not know is that you can also opt for stocks depending on the project you choose. Even though these two terms often come up in finance, they are radically opposed. We invite you to discover all the secrets of investing in stocks: characteristics, duration, valuation, taxation... You'll know everything!

⏩ To learn more about bonds, visit our dedicated article.

What is a stock?

How about reviewing the basics before getting into the nitty-gritty? What is a share? According to the AMF (Autorité des Marchés Financiers), it is “a participation security, or an equity security, constituting a title of ownership of a company which may be composed of one or more classes of shares.”

In short, a share represents the rights held by its owner over the company and gives them the status of partner. Also note that your liability, as a shareholder in the management of the company, is only incurred up to the amount of your contribution, regardless of the commitments made by the company.

Bearer shares and registered shares, what are the differences?

Have you ever heard of bearer shares or registered shares? If these terms are unclear to you, you've come to the right place!

• On the one hand, owning bearer shares means that you hold securities in a single securities account or PEA (Share Savings Plan). However, the company in which you are a shareholder does not know you, which means that all information passes through an intermediary. It is impossible for the company to contact you or send you additional information. Regarding the latter point, it is up to you to inform yourself by regularly consulting the information it disseminates via its website or press releases.
• On the other hand, registered shares stipulate that you are not an anonymous investor. Registered in the company's legal registers, you are informed directly and can participate more easily in general meetings. However, you should be aware that investing in pure registered shares involves opening an account with each listed company in which you hold shares. If you prefer to invest in administered registered shares, simply open an account with a financial intermediary.

⏩ To learn more about investing in PEA-PME, visit our dedicated article.

Ordinary shares and preferred shares, what are they?

An ordinary share is a type of share that gives you, like other shareholders, partial ownership of a company and voting rights.

Conversely, a preferred share offers advantages. This is a share for which the issuing company has established specific financial and political rights and which are mentioned in the articles of association or the issue contract.

How is a share valued according to the AMF?

A stock can be valued in several ways.

1. The first is the company's market capitalization. The stock price reflects the stock's market value at a given time, determined by the law of supply and demand. This represents the market value of the stock.
2. It is also possible to opt for a wealth-based approach. Also called the “revalued net asset method,” it calculates the value by subtracting the company's liabilities from the sum of its assets, such as receivables, cash, patents, etc.
3. The financial approach, or cash flow method, involves viewing the company as an economic entity capable of generating a stream of income each year. Its value is therefore equal to the sum of all the income it will be able to generate in the future. However, you should note that you must regularly update future income assumptions to take into account the cost of time (inflation, etc.).
4. The final method of stock valuation is the Price Earning Ratio (PER). What does that mean? It corresponds to the stock price divided by the net profit per share or the market capitalization divided by the profit. However, the value of a share is not based solely on figures: it is also influenced by intangible elements such as the quality of management, the company's reputation, internal organization, etc., and by external factors such as the economic context, interest rates, or even speculation.

Share Taxation

Taxation... The final topic of this article, but often very dreaded by investors. Don't panic!With Enerfip, you'll see things much more clearly at the end of this paragraph!

First of all, you should know that you can receive both capital gains and dividends, which are two distinct types of income and therefore taxed separately.

You realize a capital gainYou receive dividendsA natural person residing in France, having invested in a French issuing company.You are subject to a flat-rate tax rate. On the one hand, there are social security contributions. On the other hand, there is the mandatory flat-rate withholding tax on income (IR).
Combined, they amount to 30% in total. Capital gains realized during a year are included in the calculation of corporate tax. If the holding exceeds 5% of the company's capital at the time of the sale, and for holding for more than 2 years, the capital gain is exempt from taxation.
A share of costs and expenses of 12% of the capital gain amount is reincorporated into taxable income. With a corporate tax rate of 25%, this represents an effective tax of only 3% on the capital gain.Legal entity,
having invested
in a French issuing company.The flat tax of 30% applies automatically unless you wish to be taxed at the progressive scale. In this case, you benefit from a 40% allowance on dividends and a 6.8% deduction of CSG from your taxable income. Your dividends are taxable at the standard corporate tax rate, i.e. 25%.
But if you hold more than 5% of the capital of the company paying the dividends, only a 5% share is taxed, which amounts to an actual tax of 1.25%.

Note that for individuals or legal entities residing or taxed abroad, you should find out about the tax treaties in force in your country, as they may vary. In addition, withholding taxes may be applied to interest or dividends received.

💡 Subsequently, remember to inform us to update your status.

If you wish to invest in shares in projects dedicated to renewable energy (RE), visit our crowdfunding platform: Enerfip! You can invest in the energy transition from €10. So, what are you waiting for? Book an appointment with our Investor Relations team!