10 Key Financial Ratios for buying a Stock – Value Investing
Most of us, tempt to buying a stock at any time or any cost. Does it make sense ? Can we do the same, while hiring a person for our business. It just not happening, but the reality causes how we are doing it in the Stock market today. That is why the Oracle of Omaha – Warren Buffet says,
” The Rich invest in time, the poor invest in money “
We just got tempted to do anything in the market rather than the time (Analysis). The poor or a middle one always looking and spend their time for Money. That is the reason, why they think like as employee. On the other side, the rich invest in his time to “Money work for you” Business, but not to work for money. So, Investing in time here is the analysis of a stock based on Value Investing.
You can have some key financial ratios or the fundamental factors for buying a stock, which values a business. The Key financial ratios are completely based on Fundamental analysis – Value Investing.
10 Key Financial Ratios:
- Earning per share (EPS)
- Price to EPS ( P/E) & Price to Book value (P/B)
- Sales and Profit Margin
- P/E to Growth (PEG)
- Return on Equity (ROE) & Return on Assets (ROA)
- Debt / Equity
- Interest Coverage Ratio (ICR)
- Dividend yield and payout
- Cash flow
- Intrinsic value – Margin of safety.
The above 10 financial ratios are my favorite ratios, which i am following in the stock market based on fundamentals of a business. If you bet it to follow any of more than 8 ratios, you can feel the empire of your stock. If you follows, the all 10 ratios as predominantly, then it is a Win – Win strategy.
You can have also several financial ratios to find out online, but these above are the most common and a valuable one.
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