Key Financial Metrics

Financial Statement Metrics

  • Revenue Growth: Measures the rate at which a company's sales are increasing or decreasing over time, indicating the firm's growth trajectory.

  • Gross Profit Margin: The difference between revenue and cost of goods sold divided by revenue. This metric reflects the efficiency of a company in managing its direct costs.

  • Operating Margin: A profitability ratio measuring what percentage of a company's revenue is left over after paying for variable costs of production, such as wages and raw materials.

  • EBITDA Margin: Represents earnings before interest, taxes, depreciation, and amortization as a percentage of total revenue. It's used to assess a company's operational efficiency and profitability.

  • EPS (Earnings Per Share): Calculates the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of the company's profitability.

  • Free Cash Flow: The cash a company generates based on cash from operations (net income + depreciation and amortization - change in net working capital) subtract capital expenditures.

  • Return on Equity (ROE): Indicates how effectively a company is using its assets to create profits, calculated as net income divided by shareholder equity.

  • ROIC (Return on Invested Capital): Measures how efficiently a company generates profits from its total capital (both equity and debt). It is calculated by dividing net operating profit after taxes (NOPAT) by the total invested capital. ROIC provides insight into how well a company is using its capital to generate returns, making it a crucial metric for evaluating the effectiveness of a company's management in deploying its capital

Valuation Metrics

  • P/E Ratio (Price-to-Earnings Ratio): Compares a company's share price to its earnings per share, providing a measure of the value the market places on a company's earnings.

  • EV/EBITDA Ratio (Enterprise Value to EBITDA): Offers a valuation assessment by comparing a company's enterprise value (EV) to its earnings before interest, taxes, depreciation, and amortization (EBITDA).

  • EV/Sales Ratio: The enterprise value of a company divided by its sales. This metric is used to compare the total valuation of a company to its sales revenue.

  • Price-to-Book Ratio (P/B Ratio): Compares a company's market value to its book value, highlighting the market's valuation of the company relative to its balance sheet value.

  • Free Cash Flow Yield: A financial solvency ratio that compares the free cash flow per share a company is expected to earn against its market value per share.

Other Metrics

  • Leverage (Debt to EBITDA): A financial ratio that compares a company's total amount of debt to its earnings before interest, taxes, depreciation, and amortization (EBITDA). This ratio is a key indicator of a company's financial health and its ability to pay off its debt. A lower ratio suggests that a company is generating enough earnings and has less financial risk, while a higher ratio indicates higher debt levels relative to earnings, suggesting greater financial leverage and potential risk.

  • Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

  • Short Interest: Represents the total number of shares of a particular stock that have been sold short by investors but have not yet been covered or closed out.

  • Management Ownership Percentage: The percentage of shares held by the company's management and insiders, indicating the confidence management has in the future of the company.

  • Beta: Measures the volatility of a stock or portfolio in comparison to the market as a whole, helping investors understand the risk associated with a particular investment.