Fundamental Analysis

Fundamental Analysis

Fundamental analysis

P/E ratio (Price-to-Earnings) — share price / earnings per share (20 = the price is 20 times higher than earnings)

P/B ratio (Price-to-Book) — price / book value (the book value of assets)

P/S ratio (Price-to-Sales) — price / revenue per share (less subject to manipulation than earnings)

PEG ratio — P/E / earnings growth rate (lower = cheaper relative to growth)

EV/EBITDA — enterprise value / earnings before tax, interest, and depreciation (comparable between companies)

ROE (Return on Equity) — profit / equity (return on invested money)

ROA (Return on Assets) — profit / total assets (efficiency of resource use)

ROIC (Return on Invested Capital) — profit on invested capital (main indicator of business quality)

Debt-to-Equity ratio — debt / equity (1.0 = 50 to 50, higher = more risky)

Current ratio — current assets / current liabilities (ability to pay in the near future)

Quick ratio — (assets minus inventories) / current liabilities (more conservative)

Free cash flow — cash flow remaining after capital expenditures (real cash, not profit)

Operating margin — operating profit / revenue (profit from main activity)

Net margin — net profit / revenue (how many rubles are left from each earned)

Dividend yield — dividend per share / share price (income as % of investment)

Payout ratio — dividends / earnings (what part of earnings is returned to shareholders)

Book value — company’s equity (assets minus debts)

Intrinsic value — true fair value of a company (by DCF or other methods)

Economic moat — competitive advantage protecting the company from competitors (brand, patents, scale)

Competitive advantage — what makes the company better than its competitors