Earnings per Share (EPS)
This ration indicates the profits available to equity share
holders per share, this helps to determine the market price of equity share
Earnings per share= Profit after Tax/No. of equity share.
Dividend per share(DPS)
The amounts of profits distributed to share holders per share is
known as DPS and may be calculates as follows:
Dividend per share= Amount declared as dividend/No. of equity
shares
Dividend payout ratio (DP Ratio)
The DP ratio is ratio betweens the DPS and EPS of the firm
i.e. it refers to the proportion of the EPS which has been distributed by the
company as dividends. Dividend payout ration may be calculates as follows:
Dividend payout ratio=Dividend per share/ Earnings per
share*100
Price to Earnings Ratio(PE Ratio)
The PE Ratio indicates the expectation of the equity investors
about of the firm. The PE ratio is one of the most widely used measures of
financial analysis in practice and calculated as follows,
Price to earning ratio= Market price of share/Earning per
share.
Return on Equity(RoE)
The RoE Examines profitability from the prospective of the equity investors
by relating profits available for the equity share holders with the book value
of the equity investment.
Return on equity= Profit after Tax/Net Worth*100
Yield
The Yield is defined as the rate of return on the amount
invested. With the reference to equity shares, the yield may be defined as the
rate of return on the market piece of equity shares.
Earning yield ration=Earnings per share/Market price per
share
Dividend yield ration=Dividend per share/Market price per
share
Price to Book value ratio
The book value of share provide a floor below which the
market price of share is not expected to
fail. Shares which have lower PB Ratio may be considered as a ‘Safer” investment
and vice versa.
Price to Book Ratio= Market price per share/Book value per
share
Intrinsic value
The actual value of a company or an asset based on an
underlying perception of its true value including all aspects of business in
terms of both tangible and intangible factors. The value may or may not be same
as the current market value. The true economic worth of the share is its
intrinsic value. The fundamental analyst finds out intrinsic value of a share
by using formula:
Intrinsic value= Earnings per share * Price to Earnings
ratio.
