{"id":4961,"date":"2011-05-29T09:28:32","date_gmt":"2011-05-29T03:58:32","guid":{"rendered":"index.php\/2011\/05\/29\/stock-valuation-metrics\/"},"modified":"2011-05-29T09:28:32","modified_gmt":"2011-05-29T03:58:32","slug":"stock-valuation-metrics","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2011\/05\/29\/stock-valuation-metrics\/","title":{"rendered":"Stock Valuation Metrics"},"content":{"rendered":"<div style=\"margin: 1em;width: 310px;float: left\" class=\"zemanta-img\"><a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:IE_Real_SandP_Price-Earnings_Ratio%2C_Interest_1871-2006.png\"><img loading=\"lazy\" decoding=\"async\" style=\"border-bottom: medium none;border-left: medium none;border-top: medium none;border-right: medium none\" alt=\"Plot of S&amp;P Composite Real Price-Earnings Rati...\" src=\"http:\/\/upload.wikimedia.org\/wikipedia\/commons\/thumb\/d\/d5\/IE_Real_SandP_Price-Earnings_Ratio%2C_Interest_1871-2006.png\/300px-IE_Real_SandP_Price-Earnings_Ratio%2C_Interest_1871-2006.png\" width=\"300\" height=\"171\"><\/a>  <\/p>\n<p style=\"font-size: 0.8em\" class=\"zemanta-img-attribution\">Image via <a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:IE_Real_SandP_Price-Earnings_Ratio%2C_Interest_1871-2006.png\">Wikipedia<\/a><\/p>\n<\/div>\n<p>Every company is different, they have their own culture, target market, processes, etc. In order to have a make relative value comparisons between them, it is useful to have a common set of metrics. Here are some of the key numbers and rations:<\/p>\n<ul>\n<li>PE Ratio: the <a class=\"zem_slink\" title=\"P\/E\" href=\"http:\/\/www.wikinvest.com\/metric\/P\/E\" rel=\"wikinvest\">Price-to-Earnings Ratio<\/a> simply divides the stock\u2019s price by its earnings per share. It basically shows what investors are willing to pay for each Rupee of the company\u2019s earnings. In inverse ratio: Earnings Yield indicates how much the company yielded in earnings for each invested dollar.\n<li>PB Ratio: the Price-to-Book Ratio divides the stock\u2019s price by its net assets (less any intangibles like <em>goodwill.<\/em>) It basically indicates what investors are willing to pay for each Rupee of a company\u2019s tangible assets.\n<li><a class=\"zem_slink\" title=\"Free Cash Flow\" href=\"http:\/\/www.wikinvest.com\/metric\/Free_Cash_Flow\" rel=\"wikinvest\">Free Cash Flow<\/a>: FCF tells the investor how much cash the company is left with after capital investments.\n<li>PEG Ratio: <a class=\"zem_slink\" title=\"PEG Ratio\" href=\"http:\/\/www.wikinvest.com\/metric\/PEG_Ratio\" rel=\"wikinvest\">Price\/Earnings to Growth<\/a> ratio is a modified version of the PE ratio that takes the growth of the company into account. It is calculated by dividing the P\/E ratio by the expected earnings growth rate in %.<\/li>\n<\/ul>\n<p>So what would be an ideal investment? To get you started, you should aim for a PB &lt; 1.5, a positive and growing FCF and PEG &lt;= 1.0. Use the PE as a guide to compare a stock with industry peers. You can use our <a href=\"http:\/\/stockviz.biz\/Screener.aspx\" target=\"_blank\">screener<\/a> to shortlist stocks that meet your investment needs.<\/p>\n<p>Remember: these metrics are only snapshots of a firm at a point in time. As an investor, you should look at how these numbers have evolved over time for a company. More on this later.<\/p>\n<div class=\"zemanta-related\">\n<h6 style=\"font-size: 1em\" class=\"zemanta-related-title\">Related articles<\/h6>\n<ul class=\"zemanta-article-ul\">\n<li class=\"zemanta-article-ul-li\"><a href=\"http:\/\/www.businessinsider.com\/benjamin-graham-enterprising-investor-screen-how-does-it-work-2011-5\">Benjamin Graham Enterprising Investor Screen &#8211; How does it work?<\/a> (businessinsider.com)<\/li>\n<\/ul>\n<\/div>\n<div style=\"margin-top: 10px;height: 15px\" class=\"zemanta-pixie\"><a class=\"zemanta-pixie-a\" title=\"Enhanced by Zemanta\" href=\"http:\/\/www.zemanta.com\/\"><img decoding=\"async\" style=\"border-bottom-style: none;border-left-style: none;border-top-style: none;float: right;border-right-style: none\" class=\"zemanta-pixie-img\" alt=\"Enhanced by Zemanta\" src=\"http:\/\/img.zemanta.com\/zemified_e.png?x-id=b5c03d00-5d56-448a-82e0-59cf571d170b\"><\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Image via Wikipedia Every company is different, they have their own culture, target market, processes, etc. In order to have a make relative value comparisons between them, it is useful to have a common set of metrics. Here are some of the key numbers and rations: PE Ratio: the Price-to-Earnings Ratio simply divides the stock\u2019s &hellip; <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[28],"class_list":["post-4961","post","type-post","status-publish","format-standard","hentry","category-your-money","tag-basic","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/4961","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=4961"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/4961\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=4961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=4961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=4961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}