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 wellknown 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.

Sales Per Share
A ratio that computes the total revenue earned per share over ... 
Dilution
A reduction in the ownership percentage of a share of stock caused ... 
Free Cash Flow Per Share
A measure of a company's financial flexibility that is determined ... 
Free Cash Flow Yield
An overall return evaluation ratio of a stock, which standardizes ... 
P/E 30 Ratio
The pricetoearnings (P/E) ratio is the valuation ratio of a ... 
Cash Per Share
A company's total cash divided by its shares outstanding. Cash ...

Why should investors consider the fully diluted share amount?
Learn about the importance of considering the fully diluted shares, how it could affect a stock's share price and how dilution ... Read Answer >> 
How do I calculate earnings per share with simple capital and complex capital structure?
Learn the difference between simple and complex capital structures and how the structure affects a company's calculations ... Read Answer >> 
What is the difference between weighted average shares outstanding and basic weighted ...
Outstanding shares refers to stock that is currently held by investors, including shares held by the public, and restricted ... Read Answer >> 
What is the weighted average of outstanding shares? How is it calculated?
The amount of shares outstanding in a company will often change due to a company issuing new shares, repurchasing and retiring ... Read Answer >> 
What does it signify about a company if there is a large difference between its EPS ...
Learn more about basic earnings per share and diluted earnings per share, what the ratios measure and what a large discrepancy ... Read Answer >> 
What is the difference between earnings per share and dividends per share?
Learn what earnings per share and dividends per share are, how the two ratios are calculated and the main difference between ... Read Answer >>