Aspiring investors with no background in Finance may experience difficulty in embracing the technical aspects of investing. It can be pretty intimidating at the start when everything seems foreign and unfamiliar. To ease the learning curve, we introduce 4 essential ratios for aspiring investors which we believe will provide investors a good flavor of the stock in question.

Price to Earnings Ratio

Price to Earnings (PE) ratio is one of the most basic metric of valuation for a fundamental analyst. It is simply a ratio of a company’s current share price compared to its per-share earnings. Alternatively, it can also be calculated by dividing the company’s total market capitalization with its net income.

By comparing the current share price to the annual earnings per share, the PE ratio indicates how cheap or expensive a stock is. The higher the value, the more expensive the stock and vice versa. Stocks trading ...