Being a successful stock-picker isn’t just about being intelligent and well-informed or having the stars aligned in your favour. It actually requires doing a lot of homework. As legendary fund manager Peter Lynch once said, “If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” Doing the homework means researching on the companies you’re interested in and assessing their financial health so that you can make informed investing decisions. There are many metrics out there that can help you evaluate the attractiveness of a potential or existing investment, but these are the three key ones we think you really need to know.

1. PRICE EARNING (PE) RATIO

Easily the most well-known, the Price-Earnings ratio is the granddaddy of all investment valuation ratios. It compares the current price of a company’s shares to the amount of earnings it generates and is calculated as follows: ......