This document defines and provides examples for various financial ratios used to evaluate companies and compare their valuations, including the PE ratio, dividend yield, enterprise value, EV/EBITDA, price-to-book ratio, and more. These ratios compare metrics like stock price, earnings, revenue and cash flow to provide insights into a company's performance versus its industry peers and sector.
This document defines and provides examples for various financial ratios used to evaluate companies and compare their valuations, including the PE ratio, dividend yield, enterprise value, EV/EBITDA, price-to-book ratio, and more. These ratios compare metrics like stock price, earnings, revenue and cash flow to provide insights into a company's performance versus its industry peers and sector.
This document defines and provides examples for various financial ratios used to evaluate companies and compare their valuations, including the PE ratio, dividend yield, enterprise value, EV/EBITDA, price-to-book ratio, and more. These ratios compare metrics like stock price, earnings, revenue and cash flow to provide insights into a company's performance versus its industry peers and sector.
This document defines and provides examples for various financial ratios used to evaluate companies and compare their valuations, including the PE ratio, dividend yield, enterprise value, EV/EBITDA, price-to-book ratio, and more. These ratios compare metrics like stock price, earnings, revenue and cash flow to provide insights into a company's performance versus its industry peers and sector.
Definition: The PE ratio compares a company's stock price to its earnings per share (EPS), providing insight into its valuation. Example: If a company's stock is trading at $50 per share, and it has an EPS of $5, the PE ratio is 10 ($50 / $5). 2. Dividend Yield: Definition: Dividend yield is the annual dividend payment as a percentage of the stock's current price, indicating income generated from holding the stock. Example: If a stock pays an annual dividend of $2 per share, and the stock is trading at $40, the dividend yield is 5% ($2 / $40). 3. Dividend Yield vs Sector: Definition: This compares a company's dividend yield to the average dividend yield of its sector, helping investors assess its performance in relation to its industry. Example: If a company's dividend yield is 5%, and the sector average is 4%, the company has a higher dividend yield than its sector. 4. Dividend Yield vs Sub-sector: Definition: Similar to the above, this compares a company's dividend yield to the average yield within its sub-sector for a more specific industry comparison. 5. Enterprise Value (EV): Definition: EV is a measure of a company's total value, including its market capitalization, debt, and minority interests. Example: If a company has a market cap of $50 million, $20 million in debt, and $5 million in minority interests, its EV is $75 million ($50 million + $20 million + $5 million). 6. EV / Invested Capital: Definition: This ratio measures a company's efficiency in utilizing its invested capital to generate returns. Example: If a company has an EV of $100 million and invested capital of $80 million, the EV / Invested Capital ratio is 1.25 ($100 million / $80 million). 7. EV / Revenue Ratio: Definition: This ratio assesses a company's valuation by comparing its enterprise value to its total revenue. Example: If a company has an EV of $150 million and generates $30 million in revenue, the EV / Revenue ratio is 5x ($150 million / $30 million). 8. EV / Free Cash Flow: Definition: This ratio evaluates a company's valuation by comparing its enterprise value to its free cash flow, indicating how efficiently it generates cash from operations. Example: If a company has an EV of $120 million and generates $24 million in free cash flow, the EV / Free Cash Flow ratio is 5x ($120 million / $24 million). 9. EV / EBIT Ratio: Definition: The EV / EBIT ratio assesses a company's valuation by comparing its enterprise value to its earnings before interest and taxes (EBIT). Example: If a company has an EV of $200 million and an EBIT of $40 million, the EV / EBIT ratio is 5x ($200 million / $40 million). 10. EV/EBITDA Ratio: Definition: Similar to the EV / EBIT ratio, this ratio compares enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization). Example: If a company has an EV of $150 million and EBITDA of $30 million, the EV/EBITDA ratio is 5x ($150 million / $30 million). 11. Sector Dividend Yield: Definition: This provides the average dividend yield for all companies within a specific sector, helping investors understand sector trends. 12. Sector PB (Price-to-Book) Ratio: Definition: It offers the average PB ratio for companies in a particular sector, aiding in sector-wide valuation comparisons. 13. Sector PE (Price-to-Earnings) Ratio: Definition: This provides the average PE ratio for companies in a specific sector, helping investors assess sector-wide valuations. 14. Price / Free Cash Flow: Definition: This ratio assesses a company's valuation by comparing its stock price to its free cash flow per share. Example: If a stock is trading at $60 per share, and it has free cash flow of $10 per share, the Price / Free Cash Flow ratio is 6x ($60 / $10). 15. PB Premium vs Sub-sector: Definition: This compares a company's PB ratio to the average PB ratio within its sub-sector, helping investors understand relative valuations in a specific industry segment. 16. PB Premium vs Sector: Definition: Similar to the above, this compares a company's PB ratio to the average PB ratio within its sector, providing insight into its valuation relative to its sector. 17. PB Ratio (Price-to-Book Ratio): Definition: The PB ratio compares a company's stock price to its book value per share, indicating whether the stock is undervalued or overvalued. Example: If a stock is trading at $40 per share, and its book value per share is $30, the PB ratio is 1.33x ($40 / $30). 18. PE Premium vs Sub-sector: Definition: This compares a company's PE ratio to the average PE ratio within its sub-sector, offering insights into its relative valuation within a specific industry segment. 19. PE Premium vs Sector: Definition: Similar to the above, this compares a company's PE ratio to the average PE ratio within its sector, helping investors assess its valuation relative to its sector. 20. Forward PE Ratio: Definition: The forward PE ratio uses future earnings estimates to assess a company's valuation, providing a forward-looking perspective on its stock price. 21. Price / Sales: Definition: This ratio assesses a company's valuation by comparing its stock price to its revenue per share. Example: If a stock is trading at $50 per share, and it has revenue of $10 per share, the Price / Sales ratio is 5x ($50 / $10). 22. Price / CFO: Definition: This ratio evaluates a company's valuation by comparing its stock price to its cash flow from operations per share. 23. PS Ratio (Price-to-Sales Ratio): Definition: The PS ratio compares a company's stock price to its revenue per share, helping investors assess its valuation. 24. PS Premium vs Sub-sector: Definition: This compares a company's PS ratio to the average PS ratio within its sub-sector, offering insights into its relative valuation within a specific industry segment. 25. Forward PS Ratio: Definition: The forward PS ratio uses future revenue estimates to assess a company's valuation, providing a forward-looking perspective on its stock price. 26. PS Premium vs Sector: Definition: Similar to the above, this compares a company's PS ratio to the average PS ratio within its sector, helping investors assess its valuation relative to its sector.