5 ratios for stock picking With themarkets split between good but overvalued stocksand poor but undler- valued ones, here are a few ratios you should look up before you buy. PRICE TO EARNINGS RATIO we Dm The most commonly used ratio, it compares the price ofa stock to the ‘company's earning per share (EPS) ‘The EPS can be either for the past four ‘quarters (historical ar trailing PE) or for x the coming four quarters (forward PE), HOW/IT IS DERIVED Stock price EPS @ PRICE TO BOOK VALUE RATIO. DEBT-TO-EQUITY RATIO ‘This ratio compares the price of a stock Itmeasures a compary’s leverage by vith ts book value. The baok valueis the comparing its debt with its equity base. net value of the company's total assets The ratio indicates the proportion of the ‘minus its abilities In other words, itis company's assets that are being what shareholders willbe left with if the financed! through debt company goes bankrupt HOWIT Is DERIVED HOWIT IS DERIVED. uk aie ‘Totaliongtermdebt —————__- av = abt ecnity ratio Bookvaltieper share Shareholder equity ) PRICE TO SALES RATIO ® ASSET TURNOVER RATIO ‘This ratio compares the price of a “The ratio measures the sales gonerated stock to the revenue earned per share, for every rupee worth of assets. It ‘The revenue for the past four quarters shows firm's efficiency in using its is used inthis calculation, assets to generate revenue. HOWIT Is DERIVED HOWIT IS DERIVED Stoekprice =Ps Revere Asset turnover Revermteper share ——— Totalassets ratio