Key Indicator ( Value Investor )
Formula
Defination
Best Value
The P/E ratio can be calculated as: Market Value per Share / Earnings per Share
Market Capitalization ( Rs. Cr. )
Low is Under Valued ( < 15 ) , High value suggests that investors are expecting The price-earnings ratio (P/E ratio) is the higher earnings growth or Over valued , it ratio for valuing a company that has different value in industry segment , measures its current share price relative The average market P/E ratio is 20-25 to its per-share earnings times earnings It is calculated by multiplying the current Large Cap - > 20000 Cr. Rs, Mid Cap market price of the company's share with <20000 & > 5000 Cr. Rs , Small Cap 5000 the total outstanding shares of the Cr to 1000 Cr. Rs , Micro Cap < 1000 Cr. MC = Nos of Equity *Current Market Price company. Rs.
Dividend yield ( % )
Dividend Yield = Annual Dividend / Current Stock Price
The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share more value is good
EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability
P/E ( Price to Earning )
EPS ( Rs )
Debt ( Rs. Cr. )
more value is good
Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest Less is good
Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation. Book value is also the net asset value of a company, calculated as total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges and so on. Book value / share ( Rs )
Book value = total assets - intangible assets - liabilities
High Is good
Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. It can be calculated by dividing a company’s operating income (also known as "operating profit") during a given period by its net sales during the same period. “Operating income” here refers to the profit that a company retains after removing operating expenses (such as cost of goods sold and wages) and depreciation. “Net sales” here refers to the total value of sales minus the value of returned goods, allowances for damaged and missing goods, and discount sales. OPM ( % ) Sales ( Rs. Cr. )
OPM=Operating Income/Net Sales
More is good , differ from industry wise
Number of equity shares ( Cr. )
IV =EPSx(8.5 +2g)x7.9/Y - Where 8.5 is P/E ratio assumption , g is future EPS growth rate , Y is 10 years Indian Govt. Bond yield
“A general definition of intrinsic value would be that value which is justified by the facts—e.g. assets, earnings, dividends, definite prospects. In the usual case, the most important single factor determining value is now held to be the indicated average future earning power. The intrinsic value would then be found by first estimating this earning power, If IV is > CMP , it's good but need to and then multiplying that estimate by an consider Margin of Safety ( which is 2/3 appropriate ‘capitalization factor’ of IV )
Graham's Number ( Rs. )
GN = Square Root (22.5 x EPS x BVPS) 22.5 is max 15 PE and 1.5 P/B criteria , BVPS is Book value per share
The Graham number is a figure that measures a stock's fundamental value by taking into account the company's earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued and thus worth investing in If GM is > CMP , considerd as a undervalued stock
PEG Ratio
The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. The PEG ratio is used to determine a stock's value while taking the company's earnings growth into account, and is considered to provide a more complete picture than the P/E ratio. PEG ratio = P/E ratio / earnings growth rate
Intrinsic Value ( Rs. )
Stocks having PEG<1 has higher potential to increase its EPS (and hence its market price) in time to come & PEG > 1 The stock is overvalued We cannot expect future growth in market price of stock as its EPS will probably decrease in time to come
EC = Face Value *nos of Equity share
The face value of a share of stock is known as its par value, which is the legal capital of each share of stock The amount of capital raise during listing of the company Less is good
ICR = EBIT ( Earning before interest & Taxes )/Interest Expense
The interest coverage ratio is a financial ratio that measures a companyâ&#x20AC;&#x2122;s ability to make interest payments on its debt in a timely manner Less is good
Face value Equity capital ( Rs. Cr. )
Interest coverage Ratio - ICR
The return on capital employed ratio shows how much profit each Rs of Return on capital employed (ROCE) is a employed capital generates. Obviously, a financial ratio that measures a company's higher ratio would be more favorable profitability and the efficiency with which because it means that more Rs of profits ROCE = Earnings Before Interest and Tax its capital is employed are generated by each Rs of capital employed Return on capital employed ( % ) ROCE(EBIT) / Capital Employed More is good Promoter holding ( % ) % of share hold by Promoter % of share hold by Promoter
Debt to equity Ratio
The debt to equity ratio is a financial, liquidity ratio that compares a companyâ&#x20AC;&#x2122;s total debt to total equity. The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. A higher debt to equity ratio indicates that more creditor financing (bank loans) is used than Less is good Debt to equity Ratio = Total Liabilities /Totalinvestor Equity financing (shareholders).
Price to Free Cash Flow - P/FCF
The price to book ratio, also called the P/B or market to book ratio, is a financial valuation tool used to evaluate whether the stock a company is over or undervalued by comparing the price of all outstanding shares with the net assets of the company. In other words, it’s a calculation that measures the difference between the book value and the total share price of the company. Less is good P/B = Market price per share / Book Value per share Investors often hunt for companies that have high or improving free cash flow but low share prices. Low P/FCF ratios The price-to-free cash flow ratio (P/FCF) typically mean the shares are is a valuation method used to compare a undervalued and prices will soon Price to Free Cash Flow = Market company’s current share price to its per- increase. Thus, the lower the ratio, the Capitalization / Free Cash Flow share free cash flow. "cheaper" the stock is.
Enterprise Value ( Rs. ) - EV
Enterprise value, also called firm value, is a business valuation calculation that measures the worth of a company by comparing its stock price, outstanding debt, and cash and equivalents in the event of a company sale. In other words, it’s a way to measure how much a purchasing company should pay to buy out another company High Is good EV = Market Capitalization +Debt- Current Cash
Price to book value- P/B
The EV/EBITDA ratio is a comparison of enterprise value and earnings before interest, taxes, depreciation and amortization. This is a very commonly used metric for estimating the business valuations. It compares the value of a company, inclusive of debt and other liabilities, to the actual cash earnings exclusive of the non-cash expenses
Enterprise Value to EBIT ( Rs. )
EV/EBITDA Ratio = EV / EBITDA
Current ratio
The current ratio is a liquidity and efficiency ratio that measures a firmâ&#x20AC;&#x2122;s ability to pay off its short-term liabilities with its current assets. The current ratio is an important measure of liquidity because short-term liabilities are due within the next year. Current Ratio = Current asset / Current liabilities
Quick Ratio
QR = cash + cash equivalents + shortterm investments +and current receivables /current liabilities
The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its current liabilities when they come due with only quick assets. Quick assets are current assets that can be converted to cash within 90 days or in the short-term. Cash, cash equivalents, short-term investments or marketable securities, and current accounts receivable are considered quick assets.
A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments.