How to Pick Best Stock To Investments

With the market split between good but overvalued stock and poor but undervalued ones, here are five ratios you look up before you buy.





1. PRICE TO EARNINGS RATIO

The most commonly used ratio, It compares the price of a stock to the company's earning per share (EPS). The EPS can be either for the past for quarters ( historical or trailing PE) or for the coming four quarters (Forward PE).





HOW IT IS DERIVED

Stock Price

𝄖𝄖𝄖𝄖𝄖𝄖𝄖 = PE

EPS





2. PRICE TO BOOK VALUE RATIO

The ratio compares the price of a stock with its book value. The book value is the net value of the company's total assets minus its liabilities. In other words, It was shareholders will be left with if the company goes bankrupt.





HOW IT IS DERIVED Stock Price 𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖 = PBV Book Value Per Stock

3. PRICE TO SALES RATIO The ratio compares the price of a stock to the revenue earned par stock. The for the past four quarters it used in the calculation.

HOW IT IS DERIVED Stock Price 𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖𝄖 = PS Revenue Per Stock

4. DEBT-TO-EQUITY RATIO It measures a company's leverage by comparing its debt with its equity base, The ratio indicates the proportion of the company's assets that are being financed through debt.

