The decision to buy one or another share is not simple. Large investors have advisors and experts who manage their portfolios. However, people who are not professionally dedicated to it must conform to their intuition. But regardless of trends and fashions, there are a number of parameters in the Exchange that allow analyzing whether the price of a share is adequate or not.
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The price is the amount of money a buyer is willing to pay for a good, but in the stock market it is not always easy to determine that price. But in the Exchange, as in all disciplines, there are a number of “formulas” to know if a value is expensive or cheap. For this, there are different resources that investors can consult on the Internet and serve to operate in a more rational way in the markets.
The PER or Price Earnings Ratio, is the indicator par excellence in the stock market. This relates the price at which a share is quoted with the benefits generated by that company. It is a simple division between the price of the share and the net profit between the numbers of shares of that company. Use Upstox margin calculator to determine the stock investment value.
Value in books
This variable is not as well-known as PER, but it allows us to know what the “real” value of a company is. As the name implies, the carrying amount of a share takes into account how much the assets of that company are worth, based on its accounting. But not only its assets, but the value of its assets less its obligations divided by the total number of shares in circulation. It would be to add all the assets that a company has and subtract the debts. The result would be the book value, which divided by the number of shares tells us what the “real” price is.
The dividend yield is another of the most used variables to compare the price of a share and is essential for small investors. This percentage compares the expected dividend per share between the prices of the latter. In general terms, companies with a higher dividend yield mean a better purchase, since the investor will receive most of the benefit via dividends. This variable should be especially taken into account by those investors who seek to collect dividends on a recurring basis.
Profit per share
The profit per share or BPA is a widely used variable, since it takes into account the profit generated by a company among its number of shares. The calculation is very simple – the division of profit for a quarter or a year by the number of shares at that time. The higher, it will indicate that the greater the profit the company can generate for each share. The payout is not in itself a stock market ratio, but it allows investors to know what part of the profit the company is willing to share among its shareholders.