Ratios help

[viciam]

Hi all,

I'm trying to learn how to calculate ratios on my quest to become a decent investor. So far I've made a list of ratios which I've got from reading tons of material on the internet.

I understand what I am about to ask will take about 10 - 15 minutes of your time and for you to open your memory banks up and you might be thinking why would I do this for free, but this is important to me and you will really be helping a confused person out.

So which one out of these ratios are the most important in investing and which other ratios would you add to this list, I will then go and read more about these and the other ratios you tell me about too.



Market Cap
Capitalization
Working Capital
Working Capital / Share
Working Capital / Dollar of Sale
Current Ratio
Quick Ratio
Debt to Equity
Debt to Assets
Long Term Debt to Assets
Long Term Debt to Equity
Overall Cash Flow
Cash Flow to Earnings
Interest Coverage Ratio
Inventory Turnover
Accounts Receivable Turnover
Accounts Payable Turnover
Asset Turnover
Sales to Net Working Capital
Current Liabilities to Inventory
Current Liabilities to Net Worth
Fixed Assets to Net Worth



Equity per Share
Earnings per Share
Diluted Earnings per Share
EPS Growth Rate
Dividends per Share
Dividend Payout Ratio
Return on Equity
Return on Capital Employed
Return on Assets
Price to Earnings Ratio
Forward Price to Earnings
Price to Book Ratio
Price/Earnings to Growth
Price/Earnings to Growth & Div Yield
Price to Sales Ratio
Price to Cash Flow
Dividend Yield
Enterprise Value Multiple
Return on Investment
Du Pont Return on Assets



Gross Profit Margin
Net Profit Margin
Operating Margin
Return on Assets
Profit/Loss Ratio
Revenue per Share
Cash Flow Margin
Cash Return on Assets
Cash Return to Shareholders
Return on Net Worth
Return on Capital Employed
Effective Tax Rate
Operating Cash Flow
Free Cash Flow

Thank you in advance

 

[tech/a]

In my view

You only need to know your Reward to Risk Ratio.

The massive list you have will only add to your confusion when trying to establish a " value "
For the stocks you look at.

You'll find even the most undervalued stocks tank and your R/R goes with it!

How you manage your trade and more importantly your portfolio----will determine your profitability---
Not admirable in depth research.

 

[wayneL]

In my view

You only need to know your Reward to Risk Ratio.

The massive list you have will only add to your confusion when trying to establish a " value "
For the stocks you look at.

You'll find even the most undervalued stocks tank and your R/R goes with it!

How you manage your trade and more importantly your portfolio----will determine your profitability---
Not admirable in depth research.

I would agree, but I'm a technical trader as well.

But something tells me OP is not a technical trader. This makes R/R as fuzzy a concept as those other ratios.

For the fundy investor some of those other ratios are important, to them. Let's let them at it IMO.

 

[tech/a]

For the fundy investor some of those other ratios are important, to them. Let's let them at it IMO.

Diplomacy--Wayne

I employ the Time Reward Ratio.

And will leave them to it with the following.

If your looking for a way to invest in the markets once
mastered which can take all of 10-30 mins a day and
you can work your own ratios quickly and easily while
making clear cut decisions about a stock/index or commodity
with the ability to trade short as well as long.

CONSIDER TECHNICAL TRADING.

 

[viciam]

Oh god still so confused

I'm still trying to find myself as an investor, but I think Im probably a value investor with a hint of a growth investor

 

[ENP]

Oh god still so confused

I'm still trying to find myself as an investor, but I think Im probably a value investor with a hint of a growth investor

I consider myself a value/long term type investor and the things I look for number crunching wise are:

- return on equity
- gross and net profit margins
- 5 and 10 year growth rates in revenue, profit, EPS and dividend.
- P/E ratio
- debt/equity ratio
- market capitalisation

Why these?

If I can find these out, I can find a company that I consider cheap for what the price currently is. Whether it can earn better returns and margins over time than it's main competitors and the market in general. Whether it is growing because of aquisition or organically and how much debt it is using to grow. I also prefer bigger companies as opposed to smaller, speculative type companies (although I've learnt this the hard way through trial and error).

It's along the lines of Warren Buffett but I've tweaked it a bit to suit me. I used to own some smaller companies with the hope of getting rich quick, but I've come to realise I quite like sleep and my sanity so I have a more stable approach to picking my investments. I also don't use debt to invest like I used to, lost too much sleep also.

I'm currently invested in RYM Ryman Healthcare on the NZX where I live in New Zealand, CCL Coca Cola, CCP Credit Corp and RHC Ramsay Healthcare on the ASX and NKE Nike, MCD McDonalds and WWY Wrigleys Chewing Gum on the USA NYSE market. Look through their annual reports and you can see a similar trend in the above number crunching I said above. Then compare it to a company such as perhaps Telstra or Quantus and you can see a markable difference in the numbers.

 

[burglar]

... The massive list you have will only add to your confusion ...

The CEO wants the Executive Summary in the Annual Report.
The CFO wants Accounts Receivable, Accounts Payable et al.
The Operations Manager wants the Operating Statistics.
The Marketing Manager wants the Sales Reports, SWOT analysis etc.
The Manager, Corporate Affairs wants KPI’s (Key Performance Indicators).

It’s like tech/a says, “You only need to know your Reward to Risk Ratio.”!!
I'm with the duck here 100%

 

[springhill]

You only need to know your Reward to Risk Ratio.

Agree.

MC:Cash ratio is important to me.

 

[odds-on]

RM Intrinsic Value / Median Analyst Price Forecast.

 

[john5]

price to book ratio and dividend payout ratio are two important ones