Ratios and What They Mean

Question 1

Price/Book Ratio (P/B)

Answer 1

The P/B measures the value of a company relative to its book value

Company’s stock price per share / Company’s book value per share

P/B ratios under 1 are typically considered solid investments.

Question 2

Price to Earnings Ratio (P/E)

Answer 2

Shows whether a company’s stock price is overvalued or undervalued.

Average ranges from 13 to 15

Share Price / EPS

Question 3

Earnings Per Share (EPS)

Answer 3

Company’s Profit - Dividend / Outstanding Shares

The higher the EPS, the more “profitable”