Valuation Ratios
Valuation ratios are used to determine what a company is worth. These ratios help investors understand whether a particular company's share price is cheap ("undervalued") or expensive ("overvalued") by comparing it with industry averages or historical data.
Why Use Valuation Ratios?
Valuation ratios are simple to calculate and easy to understand, making them popular among investors. They provide a quick snapshot of a company's market value relative to its earnings, sales, or cash flow. Most valuation ratios are most effective when compared against the company's industry peers or its own historical range.