Investment Valuation Ratios Flashcards
What is Earnings per share?
- EPS is a measure of the profitability of a company that is expressed as an amount per share
- Three are three versions, basic EPS, earnings before interest and tax and earnings before interest, tax, depreciation and amortisation
What is price-earnings ratio?
Measures how highly investors value a company in its ability to grow its income stream
A company with a high P/e ratio relative to its sector average reflects investors expectations that the company will achieve above average growth
What is dividend yield?
Give investors an indication of the expected return on a share so that it can be compared to other shares and other investments
Dividend yield also provides indication of a companies perceived ability to grow its dividends.
A low dividend yield implies high dividend growth
What is dividend cover?
Considers the ability of the company to continue paying such a dividend - it looks at how many times a company could have paid out its dividend based on the profit for the year
what is price to book ratio?
measures the relationship between the companies share price and the net book, or asset value per share
If the ratio shows that the share price is lower than its book value , it can indicate that its undervalued or the market sees it as a stagnant investment
What is the sharpe ratio?
Measures the excess return for each unit of risk that’s taken to achieve the return
Return - risk free return / standard deviation
The higher the sharpe ratio, the better its risk adjusted return has been
