Fundamental Analysis Ratio For Stock Picking
Fundamental analysis is a valuation method used to determine the value of a stock by using financial and economic analysis. It is very important for traders and investors to analyze financial data in detail in order to make the right stock picking decision. Many investors use fundamental analysis or in combination with other tools to evaluate and choose stocks to invest in.
Following are some of the most popular fundamental analysis ratios for good stock picking:
1) Earnings per Share (EPS): EPS is derived by dividing the net profit after taxes by the total number of equity shares issued. It is a fundamental ratio used as a measure of a company's profitability. When comparing two stocks, the higher the Earnings per Share the better it is.
2) Price to Earning (P/E) ratio: This is a fundamental ratio and used extensively in valuation of company shares. It is a measure of the price paid for a share relative to the profit earned by the firm per share. Generally, the higher the price earning ratio the better it is because the market is willing to pay more for each dollar of company's earnings.
3) Dividend Yield: One way to determine if a stock would be a good investment is to calculate its dividend yield. This ratio measures the percentage return a company paid out in the form of dividends.
4) Price/Earning to Growth (PEG) ratio: This ratio is calculated by dividing the P/E by the projected earnings growth rate. A lower PEG indicates that the stock is more undervalued.
5) Book Value per Share: It is a ratio that is calculated by subtracting the company liabilities from the company assets, then dividing it by the total number of shares. This is often used by traders to determine the level of safety associated with a stock investment.
Following are some of the most popular fundamental analysis ratios for good stock picking:
1) Earnings per Share (EPS): EPS is derived by dividing the net profit after taxes by the total number of equity shares issued. It is a fundamental ratio used as a measure of a company's profitability. When comparing two stocks, the higher the Earnings per Share the better it is.
2) Price to Earning (P/E) ratio: This is a fundamental ratio and used extensively in valuation of company shares. It is a measure of the price paid for a share relative to the profit earned by the firm per share. Generally, the higher the price earning ratio the better it is because the market is willing to pay more for each dollar of company's earnings.
3) Dividend Yield: One way to determine if a stock would be a good investment is to calculate its dividend yield. This ratio measures the percentage return a company paid out in the form of dividends.
4) Price/Earning to Growth (PEG) ratio: This ratio is calculated by dividing the P/E by the projected earnings growth rate. A lower PEG indicates that the stock is more undervalued.
5) Book Value per Share: It is a ratio that is calculated by subtracting the company liabilities from the company assets, then dividing it by the total number of shares. This is often used by traders to determine the level of safety associated with a stock investment.
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