1. Earnings This is the first step that every investors to look for and that is , Is company is making profit or not. If yes then how much profit is a company is making. Earning are the main factor to find the future price of its share trading in stock exchanges. Factors that effects earning are assets, liability , sales, cost of a product. In technical terms this method is called EPS (earnings per share).
2. Profit Margin A profits margin tell you that how much a company keep in earning out of every rupee of the revenues. This is useful comparing competitors under same categories. Higher profit margin indicates that the company has good control over its cost among its competitors.
3. Return On Equity (ROE)ROE shows that how good a company use investment funds to generate growth. ROE is useful for comparing the profitability of companies within a sector or industry. Investors are interested in those company’s that have high and increasing ROE, because that means company has been successful in using shareholders money to invest in growth projects that gives high returns.
Return On equity = Net Income/Avg. shareholders equity (or net worth).
4. Price to earning (P/E)This PE is the on thing that investors looking for. Investors looks at this PE Number as if it tells you everything about company. But its actually not. (if it did then their is no point looking at other numbers). In short High PE indicates that stock market has high hope in the stock so investors bid higher in exchanges on the other hand low PE indicates “vote of no confidence” investors have no faith in future earnings. So you might be thinking, what is the right P/E honestly their no right answer for this question.
P/E = Stock Price / EPS
5. Price to book (P/B)P/B is an investment valuation used by investors to compare market value of a company’s share to its book value. It also indicates estimated value of a company.
P/B Value = Stock price per share / Shareholders equity per share