Market Test Ratios : Investment Valuation

Market Test Ratios Market Test Ratios help investor to estimate the attractiveness of a potential or existing investment and get an idea of its valuation. These ratios are concerned with the return on investment for shareholders, and with the relationship between return and the value of an investment in company’s shares. This section of the … Read more

Price/Earnings To Growth Ratio

Price/Earnings To Growth Ratio Price/Earnings To Growth Ratio is a refined version of the P/E ratio was popularized by Peter Lynch, in his 1989 book One Up on Wall Street that “The P/E ratio of any company that’s fairly priced will equal its growth rate”. The P/E ratio is the most popular way to compare the relative … Read more

Price/Sales Ratio

Price/Sales Ratio The Price/Sales Ratio measures the price of a company’s stock against its annual sales, instead of earnings. It is calculated by dividing the company’s market cap by the total revenues of the company. It is also calculated by dividing the per-share stock price by the per-share revenue. Much like P/E, the P/S number … Read more

Price to Book value Ratio

Price to Book value Ratio Price to book ratio (PBV ratio or P/B ratio) expresses the relationship between the stock price and the book value of each share. This ratio used to compare a company’s book value to its current market price. This ratio also gives some idea of whether an investor is paying too … Read more

Price/Cash flow Ratio

Price/Cash flow Ratio The price/cash flow ratio is a ratio used by investors to compare a company’s market value to its cash flow. It is calculated as follows: This ratio considers cash flows only and removes the effect of non cash items like depreciation. It is calculated by dividing market value of a share to … Read more

Dividend Yield Ratio

Dividend Yield Ratio Dividend yield is expressed as an annual percentage and is calculated as the company’s annual cash dividend per share divided by the current market price of the stock. This ratio is important for those investors who are interested in the dividend income. How to calculate Dividend Yield Ratio? It is calculated as … Read more

Payout Ratio

Payout Ratio Payout Ratio indicates as to what proportion of earning per share has been used for paying dividend and what has been retained. Dividend payout ratio is very important for shareholder’s to know that if a company has used whole or substantially the whole of its earning for paying dividend and retained nothing for … Read more

P/E Ratio

What is P/E Ratio? The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. High ratio indicates the share is overvalued and low ratio shows that share is undervalued. How to Calculate P/E … Read more

Earning per Share Ratio : EPS

Earning per Share Ratio : EPS Earning per Share Ratio helps in determining the market price of equity shares of the company and in estimating the company’s capacity to pay dividend to its equity shareholder. How to calculate Earning per Share Ratio? It is calculated as follows: If there are both preference and equity share … Read more

Return on Equity

Return on Equity This ratio indicates the percentage of net profit to equity shareholders’ capital. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors. Return on Equity shows how well a company uses investment funds to generate earnings growth. ROEs between 15% … Read more