狮山巡礼
投资杂谈
Understanding Stock Market Ratios
Ever wondered how smart investors pick winning stocks?
They use stock market ratios simple calculations that reveal a companys health. Lets break down the most useful ones.
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The Price-to-Earnings (P/E) ratio shows how much youre paying for each dollar of profit. A high P/E might mean investors expect growth, but it could also signal an overvalued stock.
The Earnings Per Share (EPS) tells you the profit allocated to each share. Rising EPS usually means the company is growing.
Why they matter: These ratios help you avoid overpaying for stocks. Think of them as the price tag checker of investing.
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The Debt-to-Equity ratio reveals how much a company relies on borrowing versus owner funding. Lower is generally safer.
The Interest Coverage ratio shows how easily a company can pay its debt interest from its earnings.
Why they matter: Theyre like checking someones credit score before lending them money. High debt can sink even profitable companies during tough times.
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Return on Equity (ROE) measures profit generated from shareholder investment. A higher ROE means better use of investor money.
Return on Assets (ROA) shows how well a company uses its assets to make profit.
Why they matter: These ratios reveal management efficiency. Good managers create more value from the same resources.
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The Price-to-Cash Flow (P/CF) ratio compares a stocks market price to its cash flow. A lower ratio might signal an undervalued company.
PEG ratio shows your value based on the P/E ratio and earnings growth rate.
Why they matter: They help you compare value across different companies and find income-generating investments.
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No single ratio tells the whole story. Smart investors use combinations of ratios.
For example, a stock with low P/E, low debt, high ROE, and good dividend yield could be a hidden gem.
These ratios arent crystal balls, but they are powerful tools.
They turn complex financial statements into simple numbers you can use to make better decisions. Start using them in your research, and youll see the market in a whole new way.
