Valuation Ratios
Prices compared with earnings, book value, sales, cash flow, and dividends. 21 topics.
P/E Ratio (Price-to-Earnings Ratio)
The share price divided by earnings per share. It says how many rupees the market pays for one rupee of earnings.
Forward P/E Ratio
Price divided by the earnings analysts or the company expect over the next twelve months, or the next fiscal year.
Trailing P/E Ratio (TTM)
Price divided by earnings over the last twelve months, often called TTM for trailing twelve months.
PEG Ratio
The P/E ratio divided by the expected earnings growth rate. It asks whether the multiple is large relative to growth.
P/B Ratio (Price-to-Book Ratio)
Market price divided by book value per share. It compares the market value of equity with the accounting value of equity.
P/S Ratio (Price-to-Sales Ratio)
Market capitalization divided by revenue. It prices the company on sales when earnings are absent or not comparable.
EV/EBITDA Ratio
Enterprise value divided by EBITDA. It compares the value of the whole firm with cash operating profit before depreciation.
EV/EBIT Ratio
Enterprise value divided by EBIT, which is operating profit after depreciation and amortization.
EV/Sales Ratio
Enterprise value divided by revenue. It prices the operating business, including debt, against sales.
Price-to-Cash Flow Ratio
Share price divided by cash flow per share, usually operating cash flow.
Price-to-Free Cash Flow Ratio
Market capitalization divided by free cash flow, the cash left after the spending needed to maintain and grow the asset base.
Dividend Yield
The annual dividend per share divided by the current share price, expressed as a percentage.
Earnings Yield
Earnings per share divided by price. It is the inverse of the P/E ratio.
Book Value Per Share (BVPS)
Shareholders' equity divided by the number of shares. It is the accounting residual behind each share.
Intrinsic Value
An estimate of what a business is worth based on the cash it can produce, rather than the price on the screen today.
Margin of Safety
The gap between estimated intrinsic value and the price you pay. It is the room for error in the estimate.
Market Capitalization
The market's value of the equity: share price times the number of shares.
Enterprise Value (EV)
The value of the core operations: equity value plus net debt and other claims, minus cash that is truly surplus.
Replacement Value
What it would cost today to rebuild the company's assets and competitive position from scratch.
Graham Number
A conservative screen from Benjamin Graham that combines earnings and book value into a ceiling price.
Net Asset Value (NAV)
Assets minus liabilities, per share or for the whole fund. In India it is the daily price of a mutual fund unit.