EBIDTA Margin (%)
- Measurement of a company’s operating profitability. It is equal to earnings before interest, tax, depreciation and amortization (EBITDA) divided by total revenue.
- The higher the EBITDA margin, the less operating expenses eat into a company’s bottom line, leading to a more profitable operation.
PAT Margin (%)
- Calculated as: PAT/ Net sales.
- PAT margin is also known as net margins.
- It is a ratio which is used to determine the final earnings of the company on every one Rupee of sales generated.
- It is used to determine the net earnings of the company after paying the production as well as finance expenses.
- It is a useful tool in analyzing the company’s earnings after tax.
- For example, a company’s sales could rise, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to curb its expenses.
RoE (%)
- Calculated as: Net Income / Net Worth or Shareholder’s Equity or Book Value
- Measurement of a company’s profitability that reveals how much profit a company generates with the money shareholders have invested. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
RoCE (%)
- Calculated as: (EBITDA – Depreciation)/Capital Employed
- A ratio that indicates the efficiency and profitability of a company’s capital investments. RoCE should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders’ earnings.
Debt / Equity Ratio
- Calculated as: Total debt /Shareholder’s Equity or Net Worth
- High debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.
- The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.
Book Value per share
- Calculated as : (Total Shareholder’s equity – Preferred Equity) / Total Outstanding Shares
- A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.
- Should the company decide to dissolve, the book value per common indicates the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid.In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.
EPS
- Calculated as: (PAT – Preference Share Dividend) / Total outstanding equity shares
- EPS is the net earnings of the company allocated to each outstanding share of the company. An increasing trend in EPS shows that the company is performing better. While we are looking at the EPS we must also look at the Diluted EPS as it the equity may expand in future if there are convertibles or warrants outstanding in the outstanding shares number.
P/E
- Calculated as: CMP / Earnings Per Share (EPS)
- A valuation ratio of a company’s current share price compared to its per-share earnings.
- The P/E is also referred as the “multiple”, because it shows how much investors are willing to pay for per Rupee of earnings.
- However, the P/E ratio doesn’t tell us the whole story by itself. It’s usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company’s own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.
- Example, if a company is currently trading at Rs.100 a share and earnings over the last 12 months were Rs.10 per share, the P/E ratio for the stock would be 10 (100/10). EPS is usually from the last four quarters (trailing P/E), but when EPS is taken from the expected earnings of next four quarters then the PE is known as projected PE.
