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Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.

The price-to-earnings ratio is likely the best known and most valuable. It divides a stock’s current price by its earnings-per-share to reveal the value that investors are willing to pay for each dollar a company earns. A lower ratio means the stock costs less per share for the same level of financial performance than a stock with a higher ratio. P/E ratios are useful for comparing companies within the same industry, not companies in different industries.

The price-to-book ratio shows what investors will pay for each dollar of a company’s assets. It’s the stock’s share price divided by its net assets minus intangibles, such as goodwill. Companies with significant intangibles can have misleading P/B ratios. For most stocks, a ratio of 1.5 or less usually shows a solid value.

The debt-to-equity ratio is a company’s debt divided by its equity. It shows how much debt a company uses in its financing compared to its equity. Debt-to-equity ratios vary among industries, but when a number gets high, it’s a sign that the company is piling up too much debt.

Free cash flow tells investors how much cash a company has left after capital investments. It’s a company’s operating cash flow minus capital expenditures, like the cost of equipment or a building. A positive free cash flow is usually a good sign, and this metric is most revealing in difficult times.

And the price-to-earnings-to-growth ratio can reveal a company that’s undervalued but growing. It’s a company’s PE ratio divided by the growth rate of its earnings over a specific time. This metric varies among different industries.

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