Figure out Overvalued & undervalued stocks ratios for short or long term investing
Hello friends lets find some Ratio important for investing Valuation Ratios These ratios compare a company’s market price to its earnings, sales, or book value to assess its relative valuation. 1. Price-to-Earnings (P/E) Ratio Formula : P/E Ratio = Market Price per Share Earnings per Share (EPS) \text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share (EPS)}} P/E Ratio = Earnings per Share (EPS) Market Price per Share Interpretation : High P/E : May indicate the stock is overvalued (investors are paying a premium for growth). Low P/E : Could suggest undervaluation or potential issues with earnings. Compare the P/E to: Industry averages. Historical P/E ratios for the same company. Market P/E (e.g., S&P 500 average) 2. Price-to-Book (P/B) Ratio Formula : P/B Ratio = Market Price per Share Book Value per Share \text{P/B Ratio} = \frac{\text{Mark...