What are Key Ratios while doing Fundamental Analysis of Stocks Fundamental analysis of stocks is one of the best ways to screen and select stocks while investing. It is a well-known fact that successful investors like Warren Buffet, Peter Lynch, Charlie Munger and Rakesh Jhunjhunwala have used fundamental analysis of stocks to invest and create huge fortunes. Here Are A Few Key Ratios Which Can Help You In Fundamental Analysis Of Stocks: 1. Price-to-Earnings Ratio The price-to-earnings ratio is a very important ratio used in fundamental analysis of stocks as it can help you determine the market value of a stock compared to the company’s earnings. It shows what the market is willing to pay today for a stock based on its past or future earnings. To know the ideal P/E ratio one can compare the current P/E with the company’s historical P/E, the industry P/E and the P/E of the market. 2. Price-to-Book Value Ratio The price-to-book ratio or P/BV ratio measures whether a stock is over or undervalued by comparing the net assets of a company to the price of all the outstanding shares.
3. Free cash flow Free cash flow refers to the cash produced by a company through its operations, after deducting the cost of expenditures. It shows how efficient a company is at generating cash and is an important measure in determining