METRICS/Metrics
P/E, ROE, free cash flow and more: all important stock metrics explained clearly, with formula, interpretation and links to StockScorer strategies.
The price-earnings ratio (P/E) relates a stock's current price to its earnings per share. It shows how many years of profit an investor is currently paying for. It's one of the most widely used valuation metrics.
Dividend yield shows what percentage of a stock's current price a company pays out annually as dividends. It's one of the first metrics income-focused investors check.
Return on equity (ROE) measures how much profit a company generates relative to its equity. It's considered a central metric for the profitability of a business model.
Free cash flow (FCF) shows how much money is actually left over for a company after investing in its operating business: money available for dividends, debt reduction or buybacks.
The ratio of net debt to EBITDA shows how many years a company would need to repay its debt purely from operating earnings (EBITDA), one of the central metrics for assessing leverage.
EV/EBIT relates enterprise value (company value including debt, minus cash) to operating profit (EBIT). Unlike the P/E ratio, EV/EBIT accounts for a company's capital structure, making it better suited for comparing companies with different debt levels.
Return on assets (ROA) measures how much profit a company generates relative to its total balance sheet, regardless of whether the capital comes from equity or debt.
EBIT margin (operating margin) relates operating profit (EBIT) to revenue. It shows how efficiently a company generates profit from its core business, independent of interest and taxes.
Gross margin relates gross profit (revenue minus direct cost of goods sold) to revenue. It shows how much room a company has to fund sales, R&D and administration before any operating profit is even generated.
The price-to-book ratio (P/B) relates a stock's price to its book value per share. It shows how much investors are currently paying for each euro of book equity.
The PEG ratio (Price/Earnings-to-Growth) relates the P/E ratio to expected earnings growth. It answers whether a high P/E is justified by correspondingly high growth, rather than looking at the P/E in isolation.
Earnings per share (EPS) allocates a company's net income across each share outstanding. It's the base figure behind many other metrics, first and foremost the P/E ratio.
The equity ratio shows what share of total assets is financed by equity rather than debt. It's one of the central metrics for assessing a company's financial stability.
Return on sales (also net margin) relates net income to revenue. It shows how many cents of every euro of revenue actually remain as profit, after all costs, interest and taxes.
EBITDA margin relates earnings before interest, taxes, depreciation and amortization (EBITDA) to revenue. It's especially useful for comparing companies with different levels of capital investment, since depreciation has no effect.
The current ratio relates current assets to current liabilities. It shows whether a company can cover its short-term payment obligations from assets available in the short term.
The debt-to-equity ratio (D/E) relates a company's total debt to its equity. It shows how heavily a company is financed with debt relative to its own capital.
EV/EBITDA relates enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization). Since depreciation is excluded, it's especially useful for comparing companies with different levels of capital investment or depreciation policy.
The payout ratio shows what share of net income is paid out to shareholders as dividends. It's the central test of how well a dividend is covered by profit.
Revenue growth shows how much a company's sales have increased compared to the prior year. It's one of the most fundamental metrics for growth strategies and an early indicator of demand for products and services.
Return on capital (ROC) as defined by Joel Greenblatt shows how much operating profit a company generates from the capital actually tied up in its day-to-day business. Unlike many profitability ratios, it deliberately strips out goodwill and other intangible assets.