Valuation Ratio

VALUATION RATIO : To measure stock price of a company whether undervalues/overvalues relative to its value.

Examples of Valuation Ratio:

  1)  P/E

P/E = PRICE PER SHARE / EARNING PER SHARE 

Link the stock price and earning of company together . Higher PE means the stock is expansive if compared to its earning.

  2)  P/CF

P/CF = PRICE PER SHARE / CASH FLOW PER SHARE 

Cash flow is used instead of earning because earning without cash received is not ascertained yet. 

  3)  P/S

P/S = PRICE PER SHARE / SALES PER SHARE 

Used by the company without positive income yet.

  4)  P/BV

P/BV = PRICE PER SHARE / BOOK VALUE PER SHARE 

Price is compared with the net asset of company. It is the most conservative calculation when the company is liquidated, how much cash can received from the company.

  5)  EPS

EPS = NET PROFIT / TOTAL COMMON SHARES 

To indicate how much earning can be imaginary earned by possess one share of company.

  6)  DIVIDEND PAYOUT RATIO

DIVIDEND PAYOUT RATIO = TOTAL DIVIDEND PAID / NET PROFIT 

To indicate the percentage of net profit that paid out as dividend to shareholders.

Other Info: 

"ACTIVITY RATIO"

"LIQUIDITY RATIO"

"SOLVENCY RATIO"

"PROFITABILITY RATIO"