Market Ratios

4. Earnings Yield

Formula: Earnings Yield = (EPS / Market Price per Share) × 100
Example: A company’s EPS is $3, and its stock price is $60.
Earnings Yield = (3 / 60) × 100
Earnings Yield = 5%
The company generates 5% earnings on its stock price.

5. Price-to-Sales (P/S) Ratio

Formula: P/S = Market Price per Share / Sales per Share
Example: A company’s stock price is $15, and its sales per share is $5.
P/S = 15 / 5
P/S = 3
Investors pay $3 for every $1 of sales.

6. Price-to-Cash Flow (P/CF) Ratio

Formula: P/CF = Market Price per Share / Cash Flow per Share
Example: A stock price is $80, and the cash flow per share is $10.
P/CF = 80 / 10
P/CF = 8
The stock is trading at 8 times its cash flow.

7. Market Capitalization (Market Cap)

Formula: Market Cap = Current Share Price × Number of Outstanding Shares
Example: A company has 10 million shares outstanding, and its stock price is $100.
Market Cap = 100 × 10,000,000
Market Cap = $1 billion
This classifies it as a mid-cap company.

8. Enterprise Value-to-EBITDA (EV/EBITDA)

Formula: EV/EBITDA = Enterprise Value (EV) / EBITDA
Example: A company’s EV is $500 million, and its EBITDA is $100 million.
EV/EBITDA = 500 / 100
EV/EBITDA = 5
The company is valued at 5 times its EBITDA.

9. PEG Ratio (Price/Earnings-to-Growth)

Formula: PEG = P/E Ratio / Earnings Growth Rate
Example: A company has a P/E ratio of 15 and an annual earnings growth rate of 10%.
PEG = 15 / 10
PEG = 1.5
A PEG of 1.5 indicates a slightly overvalued stock compared to its growth.

10. Dividend Payout Ratio

Formula: Payout Ratio = (Dividends Paid / Net Income) × 100
Example: A company pays $50 million in dividends and earns $200 million in net income.
Payout Ratio = (50 / 200) × 100
Payout Ratio = 25%
This indicates 25% of its earnings are distributed to shareholders as dividends.