3 Popular Financial Metrics to Filter for Stocks
Investing in stocks is a complicated business. Only some find themselves being successful in this trade. However, those who do use financial metrics to differentiate between overvalued shares to undervalued ones. Three popular stock filters which we will be discussing here include
- EPS Growth Rate
- Return on Equity and
- P/E Ratio
EPS Growth Rate
EPS growth rate or Earning Per Share growth rate is a very important growth rate figure to calculate the estimated value of a company. By comparing the stock price history with the EPS history of a company, people can calculate the future trend of a stock price. One thing to consider exceptionally in the EPS growth rate is to decide whether the earning rate of growth should continue at a constant rate or the rate should be adjusted up and down. Through proper studying of a business, its products, and the competitive environment in which it survives, you can take true decisions regarding the adjustment of annual growth rates.
Stocks that bear a higher EPS growth rate in comparison to their competitors are gainers in the industry. Any company that delivers an EPS growth rate of 10% or more. It is a case of a matured company that has successfully experienced the entire economic cycle of contraction and expansion is worth investing in. An example of Singaporean companies that lead in their respective sectors with a higher than competitor. Their EPS growth rate include the Jardine group with Jardine Cycle and Carriage (SGX: C07) bearing an EPS of 3.2, Jardine Matheson (SGX: J36) with an EPS rate of 5.3 and Jardine Strategic (SGX: J37) with an EPS rate of 3.5.
Return on Equity | Financial Metrics
Return on Equity or RoE refers to the net income amount returned as a percentage of the net assets. It is also known as the shareholder’s equity. It is a revelation of the company’s earned profits compared to the total shareholder’s equity. People present on a firm’s balance sheet.
RoE is among the most important profitability metrics and financial ratios. It is often considered the ultimate mother of all ratios that can be derived from a firm’s financial statement. It measures and presents the picture of how profitably a firm utilizes its equity and how profitable it is for the investor. People calculate return on equity by dividing a firm’s net income by the average stockholder’s equity.
P/E Ratio | Financial Metrics
P/E Ratio analyzes the relationship between the price of stocks and a company’s earnings. People use it as a very popular stock metric system of analysis. You can calculate the P/E ratio by dividing the price of the stock (P) by the company’s earnings per share (E).
The point behind calculating the P/E of a company is to have an idea of the price the market is willing to pay for a firm’s earnings. The higher the ratio of P/E, the more the willingness to pay for a company’s share and vice versa. However, it can also mean that a particular stock holds very high hopes, and owing to those hopes, the stock price has bid up.
Similarly, a low P/E ratio indicates that a market has voted a firm as being of low confidence. However, this also indicates a sleeper or a gem that the market has overlooked somehow. These overlooked stocks are also termed value stocks, and those who can spot these stocks have hit the jackpot really hard. A characteristic of the P/E ratio is no standard for a right or wrong P/E.
Need Help or Advice in Academic Writing
https://independent.academia.edu/shamsulIslam8
Would you like more advice? Do you have good practices to share? Please feel free to express yourself in the comments. Also, if you want help in writing content to drive more traffic and boost conversions, please get in touch through Contact our team or send your requirements here.
Read More:
KNOW THE BASICS OF FOREX TRADING
NEED TO UNDERSTAND FOREX AND FOREX TRADING FOR BEGINNERS
IPO OUTLOOK | PUBLIC DEBUTS IN THE FINANCIAL ARENA
