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Tuesday, 15 July 2014

Valuation Ratio


VALUATION RATIO : To measure stock price of a company whether undervalues/overvalues relative to its value.

Examples of Valuation Ratio:

  1)  P/E
P/E = PRICE PER SHARE / EARNING PER SHARE 
Link the stock price and earning of company together . Higher PE means the stock is expansive if compared to its earning.


  2)  P/CF
P/CF = PRICE PER SHARE / CASH FLOW PER SHARE 
Cash flow is used instead of earning because earning without cash received is not ascertained yet. 


  3)  P/S
P/S = PRICE PER SHARE / SALES PER SHARE 
Used by the company without positive income yet.


  4)  P/BV
P/BV = PRICE PER SHARE / BOOK VALUE PER SHARE 
Price is compared with the net asset of company. It is the most conservative calculation when the company is liquidated, how much cash can received from the company.


  5)  EPS
EPS = NET PROFIT / TOTAL COMMON SHARES 
To indicate how much earning can be imaginary earned by possess one share of company.


  6)  DIVIDEND PAYOUT RATIO
DIVIDEND PAYOUT RATIO = TOTAL DIVIDEND PAID / NET PROFIT 
To indicate the percentage of net profit that paid out as dividend to shareholders.

Other Info: 
"ACTIVITY RATIO"

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