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Category Archives for "Valuation Ratio"
11

Price Earnings Ratio (P/E)

This is a complete guide on how to calculate PE ratio with detailed analysis, interpretation, and example. You will learn how to use its formula to determine if a company is currently cheap or expensive.

Definition - What is PE Ratio and How It is Used?​

The price earnings ratio, or P/E ratio, is commonly used by investors to figure out what price the market is willing to pay for shares of a particular company’s stock.

More specifically, this ratio describes a stock’s market value in relation to the amount of earnings it’s generating.

Why is PE ratio so important?​

By comparing a firm’s current earnings per share (EPS), with its current market price per share, the price to earnings ratio can help you to evaluate what a stock is currently worth, and can also help you to predict what it could be worth based on future earnings.

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8

Price Earnings to Growth Ratio (PEG)

This is an ultimate guide on how to calculate Price Earnings to Growth Ratio (PEG) ratio with thorough interpretation, analysis, and example. You will learn how to use its formula to identify if a stock is undervalued.

Definition - What is PEG Ratio of a Stock?​

The price earnings to growth ratio, also known as the PEG ratio, takes the price earnings ratio one step further.​

This valuation ratio compares a company’s current share price with its current earnings per share, and then measures that P/E ratio against the rate at which the firm’s earnings are growing.

The price to earnings to growth ratio gives you a more refined look at a potential investment’s value, since an attractively high P/E ratio doesn’t always hold up under scrutiny once you take the company’s growth rate into account.

This ratio can also show you how expensive or inexpensive a company’s stock is in relation to the rate at which its earnings are currently growing, and the rate at which they’re expected to increase over the long-term.

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14

Price Earnings to Growth and Dividend Yield (PEGY)

This is an advanced guide on how to calculate Price Earnings to Growth & Dividend Yield (PEGY) ratio with detailed interpretation, analysis, and example. You will learn how to utilize this ratio's formula to determine if a stock is currently undervalued or overvalued.

​Definition - What is PEGY Ratio?

In continuing to build upon the information provided by a company’s P/E ratio, the Price Earnings to Growth and Dividend Yield Ratio, also known as the PEGY ratio, is basically an enhanced version of the PEG ratio.

By throwing a firm’s dividend yield into the mix, you can now determine how much investors are currently willing to pay for both a stock’s earnings growth potential, and for its dividend payout.

Including a company’s dividend yield in this ratio helps to measure how inclined or disinclined an organization is to pay out earnings as investor dividends.

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Dividend Coverage Ratio

This is a detailed guide on how to calculate Dividend Coverage Ratio with thorough analysis, interpretation, and example. You will learn how to use its formula to evaluate a company's dividend performance.

Definition - What is Dividend Coverage Ratio?

The dividend coverage ratio, also known as the dividend cover ratio, is the ratio of a company’s net income over the dividend paid to shareholders.

This ratio tells us the number of times the business can pay dividends to shareholders from the profits it has earned during the period.

The dividend cover ratio is typically used by investors who want to analyze the risk of not receiving dividends.

So typically, a company with a higher ratio would suggest that is capable, potentially several times over, of paying dividends and would therefore be deemed as a less risky investment.

If, on the other hand, the ratio is less than 1, it might imply that the business cannot pay dividends, or is using borrowed money to pay dividends which are not sustainable and would be a cause for concern for investors.

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