A:

Some of the best equity valuation metrics for comparing companies in the industrial sector are operating profit margin, return on assets (ROA), the price-to-earnings (P/E) ratio, the price/earnings to growth (PEG) ratio and earnings per share (EPS).

The industrial sector encompasses a broad range of producers, and it is important to compare similar companies engaged in the same industry to obtain meaningful comparative evaluations. It is not valid, for example, to compare a tire manufacturing company with a food processing company. Nonetheless, basic measures of profitability, operational efficiency, growth rate and stock value can generally be used to evaluate similar firms in the sector.

Operating margin is an important metric of basic profitability – what remains of sales revenues after all expenses other than taxes and interest have been deducted. It is also a primary indicator of how efficient a company's executive team is at managing costs, which is an extremely important factor in the success of industrial production companies.

The ROA ratio shows the level of revenue that a company generates in proportion to its assets. It is a good indicator of how effectively a company generates additional revenue from debt financing and equity. A higher ratio indicates a company uses less to earn more.

The P/E ratio is one of the most fundamental evaluations of a company's stock price. This ratio reveals what the share price is in relation to the company's earnings. It also provides an indication of the overall market confidence in a company, as higher P/E ratios generally indicate that the market expects a company to grow and continue increasing earnings and returns for investors.

Typically, if a company's market share is not increasing, it is decreasing. Measuring a company's growth is an important evaluation point. Examining the annual growth rate in EPS, as well as looking at the PEG ratio that factors the growth in EPS into the P/E evaluation, can therefore be very helpful considerations for investors.

Market analysts pay special attention to metrics when one company significantly outperforms its competitors.

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