What is a good P/E ratio?

Depends on industry and growth. Large-cap: 15-25 is normal. High-growth tech: 30-50 may be justified. Banking: 10-15. Compare P/E with industry average and historical range.

Which single ratio is most important?

No single ratio tells the full story. Use ROE for quality, P/E for valuation, debt-to-equity for safety, and revenue growth for momentum. Look at trends over 3-5 years.

Financial Ratios for Stock Analysis

Financial ratios help you quickly assess a company's profitability, efficiency, liquidity, and valuation. Master these key ratios for smarter investing.

Valuation Ratios

P/E Ratio: Price / Earnings per share. Lower P/E may indicate undervaluation. P/B Ratio: Price / Book value. Below 1 means stock trades below asset value. EV/EBITDA: Enterprise value relative to operating profit.

Profitability Ratios

ROE: Return on Equity (net profit / equity). Good: >15%. ROA: Return on Assets. ROCE: Return on Capital Employed (includes debt). Net Profit Margin: % of revenue that becomes profit.

Safety Ratios

Debt-to-Equity: Total debt / equity. Below 1 is comfortable. Interest Coverage: EBIT / interest expense. Above 3 is safe. Current Ratio: Current assets / current liabilities. Above 1.5 is healthy.