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Category Archives for "Valuation Ratio"

Price to Cash Flow Ratio

This is a complete guide on how to calculate Price to Cash Flow Ratio (P/CF) with detailed analysis, interpretation, and example. You will learn how to use its formula to find out if a stock is currently cheap or expensive.

Definition - What is Price to Cash Flow Ratio?

When attempting to analyze a company’s value, the price to cash flow ratio (P/CF) is a useful metric to use.

It can be utilized to discern which stocks are undervalued and overvalued in various industries.

The ratio incorporates the operating cash flow, which accurately tracks the amount of cash a company brings in by adding non-cash expenses, like depreciation and amortization, back into net income.

It is important to note that there is no benchmark ratio that indicates whether a stock is undervalued or not.

Rather, you must compare the ratio to comparable companies’ ratios to obtain a relative worth.

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Price to Sales Ratio

This is a detailed guide on how to calculate Price to Sales Ratio (P/S or PSR) with thorough interpretation, analysis, and example. You will learn how to use its formula to perform a company’s stock valuation.

Definition - What is Price to Sales Ratio?

When comparing companies in similar industries, the price to sales ratio (P/S or PSR) is an important metric used to calculate a relative value.

The P/S ratio is used to evaluate a company's worth with respect to its trailing twelve-month (TTM) sales.

Taken alone, the ratio does not provide meaningful data, but, as with most ratios, taking the PSR of several comparable companies can highlight the potentially undervalued ones.

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Cash Reinvestment Ratio

This is an ultimate guide on how to calculate Cash Reinvestment Ratio with detailed interpretation, analysis, and example. You will learn how to use its formula to perform a company’s valuation.

Definition - What is Cash Reinvestment Ratio?

The cash reinvestment ratio, also known as the cash flow reinvestment ratio, is a useful metric that measures the percentage of annual cash flow that a company is investing back into its business.

Investors are keen to watch the fluctuations of a company’s cash reinvestment rate, because it can be indicative of its long-term goals and strategies.

The conventional way of thinking is that a high cash reinvestment ratio signifies a company that is expecting significant growth (think young tech companies).

On the other hand, a low cash flow reinvestment rate signifies a mature, stable company that does not expect rapid growth or expansion (think large manufacturing companies).

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Dividend Yield Ratio

This is an all-in-one guide on how to calculate Dividend Yield Ratio with detailed analysis, interpretation, and example. You will learn how to use this ratio formula to assess a company's dividend performance.

Definition - What is Dividend Yield Ratio?

The dividend yield ratio is a valuation ratio that tells us the dividend that a company pays out to its investors relative to its share price.

Cash dividends are reported in the financial statements of the company. We divide the annual dividend per share by the market value per share.

It is often used by investors who are looking for continuous dividend income.

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