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8. Price/Sales Ratio (P/S or PSR) [YF]: a revenue-based valuation, the number of dollars it costs an investor to buy a dollar's worth of a company's annual revenue. Technical analysts look for stocks with PSR values of 1.0 or below in order to find value stocks that the market might currently be overlooking.
PSR = market price of 1 share of stock
sales/share
9. Fair Value [SP]: helps to determined if a stock is a good buy based on S&P's proprietary quantitative model and their analysis of what the stock is currently worth.
10. 3-5 Year High/Low Price Projections [VL]: Value Line's share price predictions based on estimated 3- to 5-year price appreciation (annual total return projections include dividend income)
Principles of Financial Analysis
Judging a Company's Financial Health by
Statistical Calculations
Financial (Fundamental) Analysis: evaluating a company's balance sheet and income statement as a means of predicting the future, long-term price movements of its stock.
Focuses on important calculations including:
1. Return on Equity (ROE) [YF]: a ratio that relates a company's net income to its stockholders' equity. Indicates the rate of investment return. A return of much less than 10% is generally regarded as unsatisfactory. (expressed as earned net worth in Value Line Investment Survey)
ROE = net earnings
stockholders' equity
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