Market value ratios
- — Business Valuation
- — Dividend Payout Ratio
- — Dividend Policy Ratios
- — Dividend Yield
- — Enterprise Value (EV)
- — Enterprise Value Multiple
- — EV/EBITDA ratio
- — Gordon Growth Model
- — Loan-to-Value Ratio (LTV)
- — Net Asset Value per Share (NAVPS)
- — PEG ratio
- — Price to Earnings Ratio (P/E Ratio)
- — Price-to-Research Ratio
- — Price/Book Value Ratio
- — Price/Sales Ratio
- — Stock Price
Business valuation can be explained as a process and set of procedures used for estimation of economic value of an owner’s business interests. Valuation is used by the participants of financial markets for determination of prices which can be paid or received willingly to consummate a business sale.
Dividend Payout Ratio
Dividend payout ratio compares the dividends paid by a company to its earnings.
Dividend Policy Ratios
Dividend policy ratios measure how much a company pays out in dividends relative to its earnings and market value of its shares. These ratios provide insights into the dividend policy of a company. They compare the dividends to the earnings to measure how much of its earnings a company is paying out in dividends. They also compare the dividends to share prices to see how much cash flow the investors get for their investments in the company’s shares.
Dividend yield is the amount that a company pays to its share holders annually for their investments. It is expressed as a percentage and indicates attractiveness of investing in a company’s stocks.
Enterprise Value (EV)
The enterprise value (EV) measures the value of the ongoing operations of a company. It attempts to measure the value of a company's business instead of measuring the value of the company. It is the measure for calculating how much it would cost to buy a company’s business free of its debts and liabilities. It can be thought of as a theoretical takeover price of a company’s business.
Enterprise Value Multiple
Enterprise value multiple is the comparison of enterprise value and earnings before interest, taxes, depreciation and amortization. This is a very commonly used metric for estimating the business valuations. It compares the value of a company, inclusive of debt and other liabilities, to the actual cash earnings exclusive of the non-cash expenses.
The EV/EBITDA ratio is a comparison of enterprise value and earnings before interest, taxes, depreciation and amortization. This is a very commonly used metric for estimating the business valuations. It compares the value of a company, inclusive of debt and other liabilities, to the actual cash earnings exclusive of the non-cash expenses.
Gordon Growth Model
Gordon Growth Model is a model to determine the fundamental value of stock, based on the future sequence of dividends that mature at a constant rate, provided that the dividend per share is payable in a year, the assumption of the growth of dividend at a constant rate is eternity, the model helps in solving the present value of the infinite series of all future dividends. Since the assumption is based on the constant growth rate of dividends, this formula would be applicable mostly to well established and mature companies. This model was developed by Professor Myron Gordon, hence called Gordon Growth Model.
Loan-to-Value Ratio (LTV)
An examination before approving a mortgage by the financial institution is known as loan-to-value ratio. It can also be known as the risk assessment that is made before a mortgage is accepted.
Net Asset Value per Share (NAVPS)
The net asset value per share can be defined as an expression for net asset value that indicates the value per share for a fund (exchange-traded, mutual, and closed-end) or a company.
The PEG ratio which is the price/earnings to growth ratio is used to determine the relative trade-off between price of stock, earnings per share (EPS) and the expected growth of the company.
Price to Earnings Ratio (P/E Ratio)
The price to earnings ratio (P/E ratio) is the ratio of market price per share to earning per share. The P/E ratio is a valuation ratio of a company's current price per share compared to its earnings per share. It is also sometimes known as “earnings multiple” or “price multiple”.
The Price-to-research ratio can be expressed as a measure of the relationship between a company’s market capitalization and expenses on the research and development. Putting it other way, it can be referred as a comparison between how much is spent by a company on research and development and the value of its current share price. A low price-to-research ratio is considered to be financially sound, indicating that the company is invested heavily in R&D and is, therefore, most likely capable of producing future profitability.
Price/Book Value Ratio
Price/book value ratio is an investment valuation ratio used by investors or finance providers to compare market value of a company’s shares to its book value (Shareholder Equity). This ratio indicates how much shareholders are contributing/paying for a company’s net assets.
Price to sales ratio compares the price of a share to the revenue per share. This ratio is usually used for valuation of shares. It takes into account the past performance of a company for valuation of its shares.
A Stock Price indicates the cost per share of the target company. It also helps in ascertaining the changes of value of the public company in the economy. In every country’s economy, finance plays an important role in the stock market. Being one of the most complicated matter, it should be handled with great care to understand the stock price and stock market and also read the up’s and down’s of the market in order to invest in a certain business.