Ratios you should look at before investing in stocks....
Investing in stocks require a lot of research. One of the easy ways to ascertain the financial health of a company is by looking at the financial ratios of the company. Looking at the ratios you can not only analyse the company's historic performance but also make a comparison with the company's peers. However, following list is not exhaustive but these are the key ratios.
Price to earning
It is the ratio of the company's current market price to the company's earnings per share. The ratio signifies how much investors are willing to pay for the single rupee of earnings of the company. The higher the ratio means the investors are willing to pay more while lower the ratio investors are willing to pay less for the earnings of the company. Ideally, one should compare the PE ratio of the company with its historic PE ratio or with its peers. So, if the company's PE is higher than peers and its own historic value that means the company is currently overvalued or else it is undervalued.
Source: http://www.businesstoday.in/money/investment/ratios-you-should-look-at-before-investing-in-stocks/story/258408.html
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