Tools & Common Metrics
Understanding common financial metrics and how to read company reports. All information is for educational purposes only.
P/E Ratio (Price-to-Earnings)
The P/E ratio compares a company's stock price to its earnings per share. A higher P/E may indicate the market expects future growth, while a lower P/E might suggest the stock is undervalued or the company has limited growth prospects. However, P/E ratios vary significantly by industry and should be compared within the same sector.
P/B Ratio (Price-to-Book)
The P/B ratio compares a company's market price to its book value (assets minus liabilities). A P/B below 1 might suggest the stock is trading below its book value, while a higher P/B could indicate the market values the company above its book value. Like P/E, P/B ratios should be compared within the same industry.
Dividend Yield
Dividend yield shows the annual dividend payment as a percentage of the stock price. Higher yields may be attractive to income-focused investors, but very high yields could also signal financial distress. Dividend payments are not guaranteed and can be reduced or eliminated by the company.
Reading Company Reports
Company annual reports and quarterly results contain important information including revenue, profit margins, debt levels, and management commentary. Key sections to review include the balance sheet, income statement, cash flow statement, and management discussion and analysis (MD&A). Always read these documents carefully and consider consulting a professional financial advisor for interpretation.
Important: Not Investment Advice
These tools and metrics are provided for educational purposes only. They should not be used as the sole basis for investment decisions. Past performance and metrics do not guarantee future results. Always conduct thorough research and consider consulting a licensed financial advisor before making investment decisions.