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Category Archives for "Valuation Ratio"

Times Preferred Dividends Earned

This is an ultimate guide on how to calculate Times Preferred Dividends Earned Ratio with detailed analysis, interpretation, and example. You will learn how to use this ratio formula to evaluate a firm's dividend performance.

Definition - What is Times Preferred Dividends Earned?

Preferred stock is one of the many ways a company can choose to raise capital. It promises a predetermined dividend to be paid on a quarterly or annual basis for perpetuity.

The times preferred dividends earned, also known as the dividend coverage ratio, is a coverage ratio which measures a company’s ability to pay its preferred stock dividend, based on its net income.

Preferred stock holders, as well as common stock holders, use this ratio to gauge the likelihood of a company missing its dividend payments.

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Net Asset Value Per Share (NAVPS)

This is an ultimate guide on how to calculate Net Asset Value Per Share (NAVPS) with thorough analysis, interpretation, and example. You will learn how to use its formula to perform a stock valuation.

Definition - What is Net Asset Value Per Share?

The net asset value per share (NAVPS), is also known as simply the ‘net asset value’ and as the name suggests, it looks at the value per single share of a fund or company.

As we are talking about value, we typically assume that the higher the better as it implies a better performing company which is also likely to have a high level of investor confidence.

For a company that is publicly traded, investors can use this measure to compare the value of a company’s stock to the actual price it is being bought and sold at which can subsequently highlight good or bad times to buy and sell providing an advantage to an investor looking for a undervalued business.

Investors can and should also look at the net asset value per share of other, similar companies or the industry benchmark in order to further gauge the value of the company stock.

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Cash Flow Adequacy Ratio

This is a complete guide on how to calculate Cash Flow Adequacy Ratio with detailed analysis, interpretation, and example. You will learn how to use its formula to evaluate a company’s cash flows.

Definition - What is Cash Flow Adequacy Ratio?

The cash flow adequacy ratio measures whether the cash generated by a company’s operations are enough to pay for its other expenses that are likely to be ongoing for example, any fixed asset acquisitions or dividends to shareholders.

An investor would use this ratio in order to understand how well the business can cover its payments which is a good indicator of its future performance capabilities.

As a general rule, a company should aim to have a cash flow adequacy ratio of 1 or above.

This would indicate that the business would be able to meet its financial obligations.

On the other hand, a ratio of less than 1 might indicate that the business could potentially have some liquidity problems.

As with any ratio, it is much more informative to compare a company’s result to that of its competitors in order to provide further context.

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Price to Book Value Ratio (P/B)

This is a thorough guide on how to calculate Price to Book Value Ratio (P/B) with detailed interpretation, analysis, and example. You will learn how to use this ratio formula to perform a stock valuation.

Definition - What is Price to Book Value Ratio?

The price to book (P/B) value ratio is an important measure that is used to value a company’s stock. It compares the market value of a company to the book value of each of its shares.

There is no ‘ideal’ ratio but as a general rule for an investor, the lower the better as it implies the stock is undervalued and is therefore considered to be a better investment however caution should be taken as it could also mean that there is something fundamentally wrong with the company.

The value of the ratio also varies greatly across industries and so a good way to decipher just how positive the result is would be to compare the ratio to other similar companies.

If your goal as an investor is to find undervalued companies then this ratio offers a way to unearth high growth companies selling at lower prices.

In this case, a value that would be a cause for investment consideration would be below 3.0.

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