Investment Valuation Ratios
  1. Investment Valuation Ratios: Introduction
  2. Investment Valuation Ratios: Per Share Data
  3. Investment Valuation Ratios: Price/Book Value Ratio
  4. Investment Valuation Ratios: Price/Cash Flow Ratio
  5. Investment Valuation Ratios: Price/Earnings Ratio
  6. Investment Valuation Ratios: Price/Earnings To Growth Ratio
  7. Investment Valuation Ratios: Price/Sales Ratio
  8. Investment Valuation Ratios: Dividend Yield
  9. Investment Valuation Ratios: Enterprise Value Multiple

Investment Valuation Ratios: Introduction

By Richard Loth (Contact | Biography)

This last section of the ratio analysis tutorial looks at a wide array of ratios that can be used by investors to estimate the attractiveness of a potential or existing investment and get an idea of its valuation.

However, when looking at the financial statements of a company many users can suffer from information overload as there are so many different financial values. This includes revenue, gross margin, operating cash flow, EBITDA, pro forma earnings and the list goes on. Investment valuation ratios attempt to simplify this evaluation process by comparing relevant data that help users gain an estimate of valuation.

For example, the most well-known investment valuation ratio is the P/E ratio, which compares the current price of company's shares to the amount of earnings it generates. The purpose of this ratio is to give users a quick idea of how much they are paying for each $1 of earnings. And with one simplified ratio, you can easily compare the P/E ratio of one company to its competition and to the market.

The first part of this tutorial gives a great overview of "per share" data and the major considerations that one should be aware of when using these ratios. The rest of this section covers the various valuation tools that can help you determine if that stock you are interested in is looking under or overvalued.

To find the data used in the examples in this section, please see the Securities and Exchange Commission's website to view the 2005 Annual Statement of Zimmer Holdings.

Investment Valuation Ratios: Per Share Data

  1. Investment Valuation Ratios: Introduction
  2. Investment Valuation Ratios: Per Share Data
  3. Investment Valuation Ratios: Price/Book Value Ratio
  4. Investment Valuation Ratios: Price/Cash Flow Ratio
  5. Investment Valuation Ratios: Price/Earnings Ratio
  6. Investment Valuation Ratios: Price/Earnings To Growth Ratio
  7. Investment Valuation Ratios: Price/Sales Ratio
  8. Investment Valuation Ratios: Dividend Yield
  9. Investment Valuation Ratios: Enterprise Value Multiple
RELATED TERMS
  1. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
  3. Combined Ratio

    A measure of profitability used by an insurance company to indicate ...
  4. Price-Earnings Relative

    A price-earnings ratio of a stock divided by the price-earnings ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Key Ratio

    A mathematical ratio that illustrates and summarizes the current ...
RELATED FAQS
  1. How do stock dividends affect the retained earnings account?

    Understand the difference between financial ratio analysis and accounting ratio analysis. Learn why ratio analysis is important ... Read Answer >>
  2. What role does ratio analysis play in valuing a company?

    Learn about the role of ratio analysis in determining company value, including some of the most common ratios used by modern ... Read Answer >>
  3. Why is the PEG (price to earnings growth) ratio something I should be looking at ...

    Understand the price/earnings to growth ratio and why it may be a better stock valuation tool than the more widely used price-earnings ... Read Answer >>
  4. What is considered a good PEG (price to earnings growth) ratio?

    Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio ... Read Answer >>
  5. To what extent should you take a company's liquidity ratio into account before investing ...

    Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying ... Read Answer >>
  6. How do I use ratios to perform a financial analysis?

    Learn which ratios are used in fundamental analysis. Find out how analysts measure company performance and financial health ... Read Answer >>

You May Also Like

Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center