Valuation
P/E Ratio
Price-to-Earnings Ratio
Market Price per Share ÷ Earnings per Share (EPS)
The P/E ratio tells you how much investors are willing to pay for each rupee of earnings. A stock trading at ₹100 with EPS of ₹5 has a P/E of 20 — meaning investors pay ₹20 for every ₹1 of earnings.
How to interpret: A high P/E (above 25-30) may indicate the stock is overvalued or that investors expect high future growth. A low P/E (below 15) may suggest undervaluation or concerns about the company. Always compare P/E within the same industry — IT companies typically have higher P/E than banking stocks.
P/E (TTM)
Price-to-Earnings Ratio (Trailing Twelve Months)
Market Price ÷ Sum of last 4 quarters EPS
TTM P/E uses actual earnings from the most recent 12 months instead of a single quarter. This smooths out seasonal fluctuations and gives a more accurate picture.
How to interpret: TTM P/E is more reliable than quarterly-annualized P/E because it uses real data instead of projections. If a company had one strong quarter, annualized P/E would look too cheap.
P/Sales
Price-to-Sales Ratio
Market Cap ÷ Total Revenue (TTM)
P/Sales measures how much investors pay per rupee of revenue. Unlike P/E, it works even for unprofitable companies since all companies have revenue.
How to interpret: Useful for high-growth companies with low or no profits. A P/S below 1 is generally considered cheap. Tech companies often trade at P/S of 5-15x. Compare within the same sector.
Market Cap
Market Capitalization
Current Share Price × Total Outstanding Shares
Market cap represents the total market value of a company. It determines whether a stock is classified as large-cap (above ₹20,000 Cr), mid-cap (₹5,000-20,000 Cr), or small-cap (below ₹5,000 Cr).
How to interpret: Large-cap stocks are generally safer and more liquid. Small-caps offer higher growth potential but with greater risk. Market cap changes daily with stock price.
P/B Ratio
Price-to-Book Ratio
Market Price per Share ÷ Book Value per Share
P/B compares market price to accounting book value. A P/B of 3 means investors pay 3x the book value — pricing in future growth, brand value, and intangible assets.
How to interpret: IT and pharma have high P/B (5-15x) due to intangible assets. PSU banks often trade at P/B below 1. Compare within the same sector only.
Book Value
Book Value Per Share
(Total Assets − Total Liabilities) ÷ Total Outstanding Shares
Book value is the net asset value per share — what each share would be worth if the company liquidated all assets and paid off all debts.
How to interpret: Price-to-Book (P/B) below 1 means the stock trades below its asset value — potentially undervalued. Banks are often valued using P/B. Manufacturing companies with heavy assets typically have higher book values.
Earnings & Revenue
EPS
Earnings Per Share
Net Profit ÷ Total Outstanding Shares
EPS tells you how much profit a company earns per share. If a company earns ₹100 Cr profit with 10 Cr shares outstanding, the EPS is ₹10.
How to interpret: Rising EPS over quarters indicates growing profitability. Compare EPS growth rate (QoQ and YoY) rather than absolute values. Diluted EPS accounts for potential new shares from options/convertible bonds.
Revenue
Revenue / Total Income
Total sales + Other operating income
Revenue is the total money a company earns from its business operations before any expenses are deducted. It is the "top line" of the income statement.
How to interpret: Consistent revenue growth (10-20% YoY) indicates a healthy business. Declining revenue is a red flag unless the company is intentionally shrinking a business segment. Compare revenue growth with industry peers.
PAT
Profit After Tax (Net Profit)
Revenue − All Expenses − Tax
PAT is the bottom line — the actual profit left after deducting all expenses including cost of goods, salaries, depreciation, interest, and taxes.
How to interpret: PAT growth faster than revenue growth means improving margins. PAT should be positive for established companies. Compare PAT margin (PAT/Revenue) across peers.
Revenue/Share
Revenue Per Share
Total Revenue ÷ Total Outstanding Shares
Revenue per share normalizes total revenue by the number of shares, making it easier to compare companies of different sizes.
How to interpret: Rising revenue per share indicates the company is growing revenue faster than it is diluting shares. A useful complement to EPS.
Profitability
EBITDA
Earnings Before Interest, Tax, Depreciation & Amortization
Net Profit + Interest + Tax + Depreciation + Amortization
EBITDA measures operating profitability without the effects of financing decisions (interest), government policy (tax), and accounting practices (depreciation). It shows how well the core business generates cash.
How to interpret: EBITDA margin above 20% is generally strong. It is the best way to compare operating efficiency across companies with different debt levels and tax situations.
EBITDA Margin
EBITDA Margin
(EBITDA ÷ Revenue) × 100
EBITDA margin shows what percentage of revenue converts to operating profit. A 25% EBITDA margin means the company keeps ₹25 as operating profit from every ₹100 of revenue.
How to interpret: Higher is better. IT services: 25-30% is typical. Manufacturing: 12-18%. Retail: 5-10%. Improving margins over time signal operational efficiency.
Net Margin
Net Profit Margin
(Net Profit ÷ Revenue) × 100
Net margin shows the percentage of revenue that becomes actual profit. It accounts for ALL expenses including interest and tax, unlike EBITDA margin.
How to interpret: Net margin below EBITDA margin is normal (due to interest, tax, depreciation). A widening gap between EBITDA and net margin may indicate rising debt costs.
ROE
Return on Equity
(Net Profit ÷ Shareholder Equity) × 100
ROE measures how efficiently a company uses shareholder money to generate profits. An ROE of 20% means the company earns ₹20 profit for every ₹100 of shareholder equity.
How to interpret: ROE above 15% is generally good. Above 20% is excellent. Very high ROE (40%+) could indicate high debt — check debt-to-equity alongside. Warren Buffett looks for companies with consistently high ROE.
ROCE
Return on Capital Employed
EBIT ÷ (Total Assets − Current Liabilities) × 100
ROCE measures how well a company generates profits from ALL capital (both equity and debt). Unlike ROE which only considers equity, ROCE gives a complete picture.
How to interpret: ROCE should be higher than the company's cost of borrowing. ROCE above 15-20% indicates the company is creating value. ROCE consistently above ROE suggests the company uses debt efficiently.
Dividends
Dividend Yield
Dividend Yield
(Annual Dividend per Share ÷ Current Share Price) × 100
Dividend yield shows the annual dividend income as a percentage of the current stock price. A stock at ₹100 paying ₹4 annual dividend has a 4% yield.
How to interpret: Nifty 50 average yield is ~1.2%. Above 3% is considered high yield in India. Very high yield (8%+) may indicate a falling stock price rather than generous dividends — investigate why.
DPS
Dividend Per Share
Total Dividends Paid ÷ Total Outstanding Shares
DPS is the actual rupee amount paid as dividend per share in a financial year. If a company with 10 Cr shares pays ₹50 Cr in dividends, DPS is ₹5.
How to interpret: Consistently rising DPS signals financial strength. Check if DPS is sustainable — payout ratio above 80% may not be sustainable long-term.
Payout Ratio
Dividend Payout Ratio
(Dividends Paid ÷ Net Profit) × 100
Payout ratio shows what percentage of net profit is distributed as dividends. A 40% payout ratio means the company pays 40% of profits as dividends and retains 60% for growth.
How to interpret: Mature companies: 30-60% is normal. High-growth companies: 0-20% (reinvesting profits). Above 100% means the company is paying more in dividends than it earned — not sustainable.
Dividend Growth
Dividend Growth Rate
((Current Year DPS − Previous Year DPS) ÷ Previous Year DPS) × 100
Dividend growth measures how fast a company is increasing its dividend payments year over year.
How to interpret: Companies with consistent dividend growth (10%+ annually over 5+ years) are called "dividend aristocrats" and are highly valued by income investors.
Other
Debt/Equity
Debt-to-Equity Ratio
Total Debt ÷ Total Shareholder Equity
D/E ratio shows how much debt a company uses relative to its own equity. A D/E of 1 means equal debt and equity. A D/E of 2 means twice as much debt as equity.
How to interpret: Below 1 is generally healthy. Below 0.5 is conservative. Above 2 is highly leveraged. Banks naturally have high D/E (8-12x) — don't compare bank D/E with manufacturing companies.
Face Value
Face Value / Par Value
Set by the company at incorporation (commonly ₹1, ₹2, ₹5, or ₹10)
Face value is the nominal value of a share as stated in the company's charter. It has no relation to market price. A ₹2 face value stock can trade at ₹2,000.
How to interpret: Face value matters for dividends (sometimes declared as % of face value), stock splits, and bonus issues. A 1:1 bonus on a ₹10 face value stock doubles your shares.
52-Week High/Low
52-Week High and Low Price
Highest and lowest trading price in the last 252 trading days
Shows the price range a stock has traded in over the past year. Helps gauge where the current price sits relative to its recent history.
How to interpret: Stocks near 52-week highs may have momentum. Stocks near 52-week lows may be value opportunities or falling for good reasons. Check fundamentals before deciding.