SIMPLE STOCK METRICS THAT YOU SHOULD KNOW

PRICE TO EARNING RATIO :

One will find price to earning ratio or in simple terms "P/E RATIO" written in various ways in the financial newspapers and other news organizations. A company's P/E ratio provides investors with data to show how expensive a share of a particular company's common stock is relative to the amount of profit that company makes.The ratio can be defined by taking the earnings that the company has earned and dividing it by the price of share.

P/E RATIOS TO FIND CHEAP STOCK:


One of the easiest ways to search a cheap stock using stock characteristic is by comparing a company and its peers in its industry. When you compaare companies with its peers, you often will come across gem stocks that are undervalued.

DIVIDEND GROWTH RATE:

It's a great metric when one has a curiosity on how to find undervalued stocks.Who does not love a dividend paying stock.A company's dividend growth rate is a good proxy for how much further their share price should grow. A company's share price is it's present value of all its future cash flows or dividends according to classical finance theory one does not knows about. A simple way to conclude the above saying is that if a company which is increaing its dividends by 2% to 4% each year should see its share price of itslisted stock grow at approximately the similar rate.

By Aakash Ranjan