Enter the market price per share in the selected currency.
Enter the earnings per share in the selected currency.
Enter the dividends per share in the selected currency.
Enter the net income in the selected currency.
Enter the equity in the selected currency.
Enter the total debt in the selected currency.
Enter the revenue in the selected currency.
History:

Explanation

What are Valuation Ratios?

Valuation ratios are financial metrics used to assess a company’s financial performance and value relative to its earnings, dividends, equity, and debt. These ratios provide insights into how well a company is performing and can help investors make informed decisions.

Key Valuation Ratios Calculated

  1. P/E Ratio (Price-to-Earnings Ratio):

    • Formula: §§ P/E = \frac{\text{Market Price per Share}}{\text{Earnings per Share (EPS)}} §§
    • This ratio indicates how much investors are willing to pay for each dollar of earnings. A higher P/E ratio may suggest that the market expects future growth.

  2. Dividend Yield:

    • Formula: §§ \text{Dividend Yield} = \frac{\text{Dividends per Share}}{\text{Market Price per Share}} \times 100 §§
    • This ratio shows how much a company pays out in dividends each year relative to its stock price. It is expressed as a percentage.

  3. ROE (Return on Equity):

    • Formula: §§ ROE = \frac{\text{Net Income}}{\text{Equity}} \times 100 §§
    • This ratio measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested.

  4. Debt to Equity Ratio:

    • Formula: §§ \text{Debt to Equity} = \frac{\text{Total Debt}}{\text{Equity}} §§
    • This ratio indicates the relative proportion of shareholders’ equity and debt used to finance a company’s assets. A higher ratio suggests more risk.

  5. Revenue to Equity Ratio:

    • Formula: §§ \text{Revenue to Equity} = \frac{\text{Revenue}}{\text{Equity}} §§
    • This ratio measures how effectively a company is using its equity to generate revenue.

When to Use the Valuation Ratios Calculator?

  1. Investment Analysis: Evaluate potential investments by comparing valuation ratios of different companies.

    • Example: Analyzing the P/E ratios of companies in the same industry to identify undervalued stocks.

  2. Financial Performance Assessment: Assess a company’s financial health and operational efficiency.

    • Example: Reviewing ROE to determine how effectively a company is using equity to generate profits.

  3. Dividend Investment Strategy: Identify companies with attractive dividend yields for income-focused investment strategies.

    • Example: Comparing dividend yields of various stocks to find the best options for dividend income.

  4. Risk Assessment: Understand the financial leverage of a company through its debt to equity ratio.

    • Example: Evaluating the risk associated with a company’s capital structure before investing.

  5. Comparative Analysis: Compare valuation ratios across different time periods or against industry benchmarks.

    • Example: Tracking changes in a company’s valuation ratios over several quarters to assess performance trends.

Practical Examples

  • Investment Decision: An investor might use the calculator to determine the P/E ratio of a tech company compared to its competitors to decide whether to invest.
  • Dividend Strategy: A retiree could use the dividend yield calculation to find stocks that provide a steady income stream.
  • Financial Health Check: A financial analyst may assess a company’s ROE and debt to equity ratio to evaluate its financial stability before making recommendations.

Use the calculator above to input different values and see the valuation ratios change dynamically. The results will help you make informed decisions based on the financial data you have.

Definitions of Key Terms

  • Market Price per Share: The current price at which a share of stock is bought or sold in the market.
  • Earnings per Share (EPS): The portion of a company’s profit allocated to each outstanding share of common stock.
  • Dividends per Share: The total amount of dividends paid out by a company divided by the number of outstanding shares.
  • Net Income: The total profit of a company after all expenses and taxes have been deducted from total revenue.
  • Equity: The value of the owners’ interest in the company, calculated as total assets minus total liabilities.
  • Total Debt: The sum of all short-term and long-term liabilities that a company owes to creditors.
  • Revenue: The total income generated from the sale of goods or services before any expenses are deducted.

This detailed explanation and the calculator will assist you in evaluating a company’s financial performance effectively.