PE Ratio (Price-to-Earnings): Stock price divided by earnings per share. Measures how much investors pay per unit of earnings. High PE = growth expectations; low PE = value or pessimism. Trailing PE uses past 12 months earnings; forward PE uses estimated future earnings. | EPS (Earnings Per Share): Net income divided by shares outstanding. Basic EPS uses actual shares; diluted EPS includes potential shares from options and convertibles. The most fundamental profitability metric per share. | PEG Ratio (Price/Earnings to Growth): PE ratio divided by annual EPS growth rate. PEG below 1.0 suggests the stock is undervalued relative to its growth. PEG above 2.0 may indicate overvaluation.
P/B Ratio (Price-to-Book): Stock price divided by book value per share. Book value = total assets minus total liabilities. P/B below 1.0 means the stock trades below its accounting value (potentially undervalued, or the market sees hidden liabilities). | P/S Ratio (Price-to-Sales): Market cap divided by annual revenue. Useful for companies with no earnings yet. Lower P/S = cheaper relative to revenue. | EV/EBITDA (Enterprise Value to EBITDA): Enterprise value (market cap + debt - cash) divided by EBITDA. More comprehensive than PE because it accounts for capital structure differences. Lower is cheaper.
ROE (Return on Equity): Net income divided by shareholders' equity. Measures profitability relative to shareholder investment. DuPont decomposition: ROE = Net Margin × Asset Turnover × Equity Multiplier. Good ROE varies by industry — 15%+ is strong for most industries. | ROA (Return on Assets): Net income divided by total assets. Measures how efficiently ALL assets generate profit, regardless of financing. Banks typically have low ROA (1-2%) due to high leverage. | ROIC (Return on Invested Capital): Operating profit after tax divided by invested capital (equity + debt). The purest measure of business quality — compares returns to the total capital invested.
DCF (Discounted Cash Flow): Valuation method that sums the present value of all expected future cash flows. DCF = sum of FCF/(1+r)^t + Terminal Value/(1+r)^n, where r = discount rate, t = year. | FCF (Free Cash Flow): Operating cash flow minus capital expenditures. The cash available to all capital providers (debt and equity). | WACC (Weighted Average Cost of Capital): The blended cost of a company's debt and equity financing, weighted by their proportion. Used as the discount rate in DCF. WACC = (E/V × Re) + (D/V × Rd × (1-T)).
CAPM (Capital Asset Pricing Model): Estimates cost of equity: Re = Risk-Free Rate + Beta × Equity Risk Premium. In Egypt, risk-free rate = T-bill yield (20-25%), equity risk premium = 5-7%. | Beta: Measures a stock's volatility relative to the market. Beta 1.0 = moves with market. Beta > 1.0 = more volatile. Beta < 1.0 = less volatile. | Free Float: Percentage of shares available for public trading (excludes controlling shareholders, government, strategic investors). Affects liquidity and index weighting.
Market Cap (Market Capitalization): Share price × total shares outstanding. Large cap > 10B EGP, Mid cap 1-10B EGP, Small cap < 1B EGP (Egyptian market context). | Book Value: Total assets minus total liabilities = shareholders' equity. Per share: equity / shares outstanding. | Dividend Yield: Annual dividends per share divided by stock price, expressed as percentage. Higher yield = more income but may indicate limited growth. | Payout Ratio: Dividends paid divided by net income. Shows what portion of earnings is returned to shareholders vs. retained for growth.
Revenue (Turnover/Sales): Total income from the company's primary business activities before any expenses. Top line of the income statement. | Net Income: Revenue minus all expenses, interest, taxes, and depreciation. Bottom line of the income statement. | EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash flow, useful for comparing companies with different capital structures and tax situations. | Debt-to-Equity Ratio: Total debt divided by total equity. Measures financial leverage. Higher ratio = more leveraged = higher risk. Egyptian banks naturally have high D/E; industrial companies should be lower.
Current Ratio: Current assets / current liabilities. Measures short-term liquidity. Above 1.5 is generally healthy. | Quick Ratio: (Current assets - inventory) / current liabilities. Stricter liquidity test excluding inventory. | Working Capital: Current assets minus current liabilities. Positive working capital means the company can cover short-term obligations. | Gross Margin: (Revenue - COGS) / Revenue. Measures production efficiency. | Operating Margin: Operating income / Revenue. Measures business efficiency after overhead. | Net Margin: Net income / Revenue. Overall profitability percentage. | Asset Turnover: Revenue / Total assets. Measures how efficiently assets generate sales. This is not financial advice.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.