What is book value???
The value at which an asset is carried on a balance sheet. To calculate,
take the cost of an asset minus the accumulated depreciation. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. Book value is a most accurate measure and valuation of the firm.
In simply, It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated. By being compared to the company's market value & the book value can indicate whether a stock is under or overpriced.
Also known as "net book value (NBV)."
What is EPS???
Earnings per share is generally considered to be the single most
important variable in determining a share's price. It is also a major
component used to calculate the price-to-earnings valuation ratio. Earnings per share serves as an indicator of a company's profitability in the near term financial year.
Net profit-Dividend on preferred shares
Eps = ------------------------------------------
Average outstanding shares
What is PE Ratio???
The price to earning (P/E) multiple or ratio is probably the most popular indicator used by investors for valuing stocks.It is the ratio of a company's stock price to it earning per share.
Current market price (CMP)
PE = -------------------------------
Earning per share (EPS)
It
tells you how to cheap or expensive a company's stock is. It is the
number of times investors must pay for the company's current earnings.
For example, assume that the share price of a company is Rs.120. If its
EPS is, say Rs 20, its P/E is 6, So investors are willing to pay 6
times for every rupee of the company's earnings. or in other way, if that firm runs on same profitable way then your invested money will get double in next 6 years. Investors have to consider this ratio before investing, we suggested go any stock which having PE ratio below 5. Avoid high PE ratio stocks.
