Evaluateing Stocks

Researching stock through the use of math will enable you to project its future performance by viewing its past performance. The amount of math necessary to do this is minimal and the formulas required are not complicated.

Price-to-earnings ratios are one of three percentages determined by comparing the current market of the stock to its dividends over the last four calendar quarters (trailing), the preceding four actual quarters (standard), or the last two actual quarters and two future projected quarters.

The earnings per share formula enables you to determine the amount of the stock’s dividend by dividing the total amount of the issuing company’s net earnings by the total number of outstanding common shares.

Current/dividend yields measure the percentage of the stock’s annual divided payments as compared to its market value. This information will enable you to determine how much profit the stock has made as a percentage of its initial purchase cost.

Current ratio is a measurement of how likely and how much an investor would be able to recoup in the case of a company’s insolvency (bankruptcy). It is determined by dividing a company’s assets by it’s liabilities.

Debt ratios are a measurement of how near or far a company’s relative worth places it toward bankruptcy. It is computed by dividing the company’s debt by its assets.

Book values are a measurement of the total value of a company. It is computed by a highly complicated formula which adds up everything-including intangible items such as name recognition—a company owns.

Credit ratings are evaluations of the value and ability of companies to repay their debts and produce future earnings. They are performed by professional disinterested parties such as Moody’s and Standard and Poor.