When we were studying we were told that “Ratio Analysis” is one of the quickest ways to analyze the financial performance of a company in several key areas such as Profitability, Liquidity, and Market value etc... Let’s see how these have been practically used in our products & getting Auto-calculated with our underlying consensus estimates.
Equity Product includes the below multiples for NTM (next twelve months) and current FY & Futures periods
- TEV/REVENUES
- TEV/EBITDA (ideal is below 10X interpreted as healthy)
- TEV/EBIT
- Price/Earnings (P/E ratio)
- PEG (Price Earnings Growth)
- P/BV (Price to Book Value/Share(BVPS))
As we know, Enterprise values is company market capitalization + total debt - cash
The first three multiples would be the fundamental indicators to know the value of a stock and financial health of a company. Since many investors shouldn’t rely on single indicators to measure the company’s performance, our products included multiple combinations taking enterprise value with Revenue, Earnings before Interest, Tax and Depreciation & Amortization or just before the debt obligations (interst) i.e. EBIT.
P/E ratio & PEG, I would say the king of all multiples, many of the analysts interested use them in order to forecast the future Price Target and on how the company going to perform in the market. P/E Ratio is Price to Earnings, i.e. Market value per share divided by Earning per share (EPS) and the PEG ratio is calculated as a company’s trailing price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. Trailing P/E is past four quarters of earnings.
P/B Ratio is Price to Equity ratio, calculated by using closing stock price and Book value per share which would helpful in determine whether the stock is undervalued or overvalued
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