Skip to main content

Translate

Important ratios for stock analysis

Important ratios for stock analysis

  • PE ratio:- PE ratio also known as the price to earning ratio and very famous between the investors. Investors use this ratio with other ratios or data to find out undervalued stocks. Read more
    Important ratios for stock analysis
    Important ratios for stock analysis
  • Earning per share:- In simple meaning it means “distribution of company’s profit between each shares” it can be used as the indicator for determining company’s profitability. It is best to use PE ratio and Earning per share comparatively.
  • Return on Assets:- Is company using its assets effectively to generate income, yes or not? This ratio tells us the truth. This ratio gives us idea about management efficiency or capability to run company profitably. It compares company’s earnings as compare to its assets
  • Dividend payout ratio:- It means “amount of dividends paid to stockholders relative to the amount of total net income of a company” Dividend payout ratio = Dividends / Net Income.
  • Retention Ratio:- What company will do with its earnings, either it distribute to its share holders or retain it within itself. Part of earning which company kept with itself known as the retained earnings, it can be used in various works like payment of debt or expansion of business and assets buying etc. Retention ratio = Retained Earnings / Net Income.
  • EV/EBITDA:- Just like the PEratio (price to earning), the EV/EBITDA is very famous for the valuation of the company. EV stands for enterprise value and EBITDA stand for Earnings before interest, tax, depreciation and amortization (EBITDA). And it compares company on very different stages on the basis of the company’s earning. If it is rightly calculated then it reveals the secret that what is the current position of the company? Is company’s share is undervalued or overvalued? Its one of the important ratios for stock analysis. Read more.
  • Price to book value ratio:- what is company’s market value after paying all its debts? In short, this is known as the book value of the company. In other words book value is “market value of the company after payment of all debts”. And when we divide book value with total number of share then we get book value per share. Price to book value ratio tells us that “how much any individual is agreeing to pay for any return?” For example, a stock which price to book value is Rs 4 that mean you are agreeing to pay Rs 4 for every Rs 1.

Comments

Popular posts from this blog

PE ratio and Its analysis

Introduction:-  PE ratio also known as Price to Earning ratio and is the most popular ratio among the investors. They use this to identify undervalued or overvalued stocks. By using it investors enhance the area of margin of safety and secure their investment. How to calculate PE ratio? PE ratio = market value per share / EPS(earning per share) Examples of calculation Assume:- Market value per share = 40 EPS (earning per share) = 12 PE ratio = 40/12 = 3.5 Market value per share = 40 Earning per share = 5 PE ratio = 40/5 = 8 Best beginners book on share market PE ratio and Its analysis How to use it? Or PE ratio using tips:- Lower PE ratio is better than higher PE ratio for selection of stock because low PE mean high earning per share and high PE mean low earning per share. And we need high earning per share. Stock/share’s PE ratio compare with other same industry’s PE ratio. If both companies market cap nearly s

My Investments and COVID-19

Everyone has witnessed huge market decline in the month of March when our PM Narendra Modi suddenly announced lockdown to tackle covid pandemic. Sensex stock market index reached all time high of 42273.87 in January of 2020 and from there it fallen down to below 26000 pts, nearly 40 % down. And from there it started healing. My Investments and COVID-19 Before this great fall my all investments were in undervalued stocks with very low P/E multiple, attractive earnings and exciting track record. Thanks to this quality stocks my own portfolio fall nearly 22 %. Although my 22% of capital vanished, I feel very delighted my portfolio beaten the market index(Sensex down nearly 40%) with significant points.  In the last year of your college generally you are not backed with huge capital support, and your capital is very limited. So securing capital is my first priority. Back on the track, I sold all the stocks with 22 % capital loss and secured rest of the principle capital