Valuation

P/E, EV/EBITDA, DCF and what a stock might be worth.

1. Price-to-Earnings in Practice — The price-to-earnings ratio is the most quoted valuation number in investing. Used well, it tells you how much optimism is built into a stock. Here is how to read trailing and forward P/E, what earnings yield means and when P/E misleads.
2. Price-to-Book and Price-to-Sales — When earnings are missing, tiny or distorted, other ratios help. Price-to-book compares the price with the company’s net assets; price-to-sales compares it with revenue. Here is when each one is useful and where each falls short.
3. EV/EBITDA — EV/EBITDA compares the value of a whole business, including its debt, with its operating earnings before accounting charges. Professionals use it to compare companies with very different debt levels. Here is what goes into it and how to read it.
4. Dividend Yield as a Valuation Check — For steady dividend payers, the yield can hint at whether a stock is cheap or expensive compared with its own history. But a very high yield is often a warning, not a bargain. Here is how to use yield wisely.
5. Discounted Cash Flow Basics — A discounted cash flow model estimates what a business is worth today based on the cash it will produce in the future. It sounds complex, but the core idea is simple. Here is the logic, a worked example and why small changes in assumptions matter so much.
6. Price vs. Intrinsic Value — Price is what you pay; value is what you get. Intrinsic value is an estimate of what a business is really worth, and the gap between that and the price is where investing decisions are made. Here is how to think about it and why a margin of safety matters.