Module 8 Ratio Analysis . Module 8 - Learning Objectives. Define key valuation ratios: price to earnings, PEG, price to sales, price to book, and price to cash flow. Evaluate stocks using valuation ratios. Define profitability ratios and use these ratios to evaluate stocks.
These companies were all hot in the communications equipment arena during the technology bull market. Evaluate them in terms of price to sales. The current market price to sales ratio is 4 and the industry price to sales is 7. Which would be the best buy based on this ratio?
Stock screeners can identify stocks by their financial ratios. You decide what kinds of financial ratios you want and they sort through all stocks and give you a list of the ones that meet your criteria. Let’s say, you are looking for stocks with low book value.
Are there any companies selling below book value? Low book value might be warranted because of slow growth. Let’s add another criteria: growth of 25%.
Investors look at supermarkets to throw off cash. Look at the following supermarket companies. Which presents the best value based on price to cash flow?
Here are 5 well-known retailers and their 2000 profit margins.Find the most recent net profit margin information.Use www.thomsoninvest.net or www.multexinvestor.com.How do they compare to 2000 profit margins?
Drug companies usually have to finance the development of new drugs. Which drug companies are financially strong? Which are weaker? Use debt to equity ratios to evaluate these companies.