Key metrics for analyzing stocks
When investing in stocks, investors look at a company’s financials, growth prospects, and valuation. They use a variety of metrics to do so, and here’s a look at some of the key ones:
Price-to-earnings ratio (P/E ratio)
The P/E ratio is a measure of a company’s stock price divided by its earnings per share. It represents the expected return on a company’s stock price, and a high P/E ratio may indicate that the market values the company’s growth potential highly.
Price-to-sales ratio (P/S ratio)
The price-to-sales ratio is a measure of a company’s stock price divided by its sales, indicating how much a company’s stock is valued relative to its sales. A low price-to-sales ratio can be an opportunity for a value investment.
Price-to-book ratio (P/B ratio)
The P/B ratio is a measure of a company’s stock price divided by its net worth, which determines its value based on its assets. A small P/B ratio may indicate that the stock price is undervalued relative to the value of its actual assets.
Analyzing financial statements
Financial statements are an important source of insight into a company’s financial position, performance, and cash flows. Revenue, net
(adsbygoogle = window.adsbygoogle || []).push({});