The Complete Guide to U.S. Stock Metrics: From P/E and P/B to ROE, FCF and Industry Metrics
“Is this stock expensive or cheap?” The share price alone cannot tell you. From P/E and P/B to profitability, growth, cash flow, financial safety, shareholder returns and industry-specific metrics, this guide gathers the metrics most used for U.S. stocks on a single page. Use the “Index of metrics” to jump straight to the one you need.
88 metricsEach with formula, benchmarks and pitfallsNine groups plus industry metrics
18.7xS&P 500 forward P/E10-year average 19.1x (FactSet, October 30, 2026)
9Groups of metrics (valuation, profitability, growth, safety and more)Industry-specific metrics covered separately
30-second read
The key points in 6 slides — enough to get the whole picture.
Beikabuzukan Column
The Complete
Guide to U.S.
Stock Metrics
From P/E and P/B to ROE, FCF and industry metrics. 88 metrics on one page.
1 / 6
Price alone says little
The share price alone
doesn’t tell you if
a stock is cheap
A share price is just the price of one share. Only by comparing it with earnings or assets can you judge high or low.
2 / 6
P/E
P/E is
“years of earnings”
The share price as a multiple of earnings per share. A higher P/E usually means higher growth expectations (though it can also rise when earnings dip temporarily).
3 / 6
P/B
P/B is
“times book value”
But in the U.S., buybacks shrink equity, so many companies have extremely high—or even negative—P/B ratios. Use it with care.
“Is this stock expensive or cheap?” Research any U.S. stock and you quickly run into a long list of metrics: P/E, P/B, ROE, FCF and many more. Yet the share price alone tells you nothing about whether a stock is cheap or expensive. You can only judge that by comparing the price with the company’s earnings, assets or sales.
This guide sorts the metrics most often used for U.S. stocks into nine groups plus industry-specific metrics, all on one page. Every metric is explained in the same format—formula, what it shows, rule of thumb, and what to watch out for—and the key metrics also show the current S&P 500 median calculated from Beikabuzukan data.
How to use this page
If you are new to investing metrics, read from Chapter 1. If you are looking for a specific metric, type its name in the “Index of metrics” just below, or use the quick reference table in the appendix. As you scroll, a “Find a metric” button in the lower right takes you back to the index at any time.
Index of metrics
88 metrics explained in this article.
Basic termsThe building blocks behind every metricChapter 1 →
A share price is simply the price of one share. A high share price does not mean the company is expensive. If Company A trades at $100 and Company B at $1,000, but A has ten times as many shares outstanding, the two companies have the same total value (market capitalization).
A 10x difference in share price, the same company value
Company A
Share price$100
×
Shares outstanding1B
＝
Market cap$100B
Company B
Share price$1,000
×
Shares outstanding100M
＝
Market cap$100B
And if two companies are worth the same, the one that earns more each year is the better deal. Investment metrics are yardsticks that compare a company’s value with its earnings, assets or sales to judge whether it looks cheap or expensive, and how strong the business is.
Basic terms to know first
Market capitalization
Market cap
Basics
FormulaShare price × shares outstanding
What it shows
The value the stock market puts on the whole company. Compare company sizes by market cap, not by share price.
Rule of thumb
In the U.S., companies worth roughly $10B or more are often called large caps, $2B–$10B mid caps, and under $2B small caps (cutoffs vary by source).
Watch out
It changes every day with the share price. It excludes debt, so use enterprise value (EV) for the price of buying the whole company.
Example$100 × 1B shares = $100B
On BeikabuzukanThe stock page “Overview”; All stocks can be sorted by market cap
Shares outstanding / diluted shares
Share count
Basics
Formula—
What it shows
Shares outstanding is the number of shares that exist today. Diluted shares also include shares that may be created later through or .
Rule of thumb
For per-share figures such as EPS, using the diluted share count is the more conservative choice.
Watch out
Tech companies that pay a lot in stock tend to add shares every year. Even with , the share count may not actually fall (Chapter 11).
On BeikabuzukanThe stock page “Financials” → “Income statement”
EPS
Earnings per share
Basics
FormulaNet income ÷ shares outstanding
What it shows
The profit each share earned over the year. It is the basis of the P/E ratio.
Rule of thumb
Companies report both “basic” and “diluted” EPS. Use diluted EPS when comparing.
Watch out
Buybacks reduce the share count, so EPS can rise even when net income is flat. One-off gains and losses also distort it.
On BeikabuzukanThe stock page “Financials” and “Valuation” (EPS vs. share price)
BVPS
BPS · Book value per share
Basics
FormulaShareholders’ equity ÷ shares outstanding
What it shows
Shareholders’ book value per share. It is the basis of the P/B ratio.
Watch out
At U.S. companies that keep buying back stock, it can shrink or even turn negative (Chapter 3).
DPS
Dividends per share
Basics
FormulaTotal dividends ÷ shares outstanding
What it shows
The dividend you receive per share over a year. It is the basis of the dividend yield.
Rule of thumb
Most U.S. companies pay dividends four times a year (quarterly). Look at the full-year total.
Watch out
Including one-time special dividends overstates the regular payout.
On BeikabuzukanThe stock page “Dividends & earnings”
FCF per share
Free cash flow per share
Basics
FormulaFree cash flow ÷ shares outstanding
What it shows
How much cash the company could freely use was generated per share.
Watch out
It drops in years of heavy capital spending. Look at multi-year averages and trends.
EV
Enterprise value
Basics
FormulaMarket cap + interest-bearing debt − cash
What it shows
The price of buying the whole company, including its debt. A buyer takes on the debt but also gets the company’s cash, so debt is added and cash subtracted.
Watch out
Cash-rich companies have an EV below their market cap. Whether leases and similar obligations count as debt varies by source.
Buy a company with $5B of debt and you inherit the debt, but you also get its $1B of cash.
The three financial statements
Most metrics are calculated from the financial results companies report every quarter (three months). They come from three statements.
Income statementHow much was earned in the periodSubtracts costs from sales to arrive at operating income and net income. The source of P/E, margins and EPS.
Balance sheetWhat the company owns and owes nowAssets, liabilities and shareholders’ equity. The source of P/B, ROE and the equity ratio.
Cash flow statementHow cash movedCash flowing in and out from operations, investing and financing. The source of FCF and related metrics.
Different kinds of numbers
The same “P/E” can take different values depending on which period and which accounting basis is used. When comparing, make sure the type of number matches.
PeriodTrailing vs. forwardTrailing figures are already reported, such as the last 12 months () or the last fiscal year. Forward figures are estimates; in the U.S. the analyst consensus is usually used
Accounting basisGAAP vs. adjusted figures follow the accounting rules. Adjusted (non-GAAP) figures exclude items such as stock-based compensation or acquisition costs at the company’s discretion and tend to look better
The nine groups of metrics
This guide groups metrics by what they tell you. The basic rule is not to judge on a single metric but to combine different kinds.
Group
Main metrics
Chapter
① Valuation
P/E, P/B, P/S, PEG, EV/EBITDA, FCF yield, intrinsic value
Share price ÷ 10-year average of inflation-adjusted EPS
P/E, earnings yield, Shiller P/E
P/E ratio
Price-to-earnings ratio, PER
Valuation
FormulaShare price ÷ EPS (= market cap ÷ net income)
What it shows
How many years of current earnings the company’s value represents, assuming earnings stay the same. A higher P/E usually means higher expectations for future earnings growth (though it can also rise when earnings temporarily fall).
Rule of thumb
There is no fixed level that means “cheap.” Compare with the overall market, the same industry and the company’s own history. The S&P 500’s forward P/E is 18.7x, slightly below its 5-year average of 19.8x and 10-year average of 19.1x (as of October 30, 2026).
Watch out
It does not work for loss-making companies (use P/S and others from Chapter 4). One-off gains and losses distort it. In cyclical industries (autos, steel, semiconductors), P/E looks lowest—and the stock looks cheapest—near peak earnings.
Example$100 share price ÷ $5 EPS = 20x (20 years of earnings)
Beikabuzukan dataS&P 500 median 23.8x (middle half: 17.1x to 34.8x)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanOn the stock page, “Valuation” shows the history; the Screener lets you filter by it
Earnings yield
Valuation
FormulaEPS ÷ share price (= 1 ÷ P/E)
What it shows
The inverse of P/E: the earnings generated each year as a percentage of the share price. Because it is a percentage, it is easy to compare with Treasury yields.
Rule of thumb
A 20x P/E equals a 5% earnings yield; 25x equals 4%.
Watch out
Unlike dividends, earnings are not all paid out to shareholders.
ExampleAn earnings yield of 5% vs. a 4.5% Treasury yield leaves only 0.5 points of extra return for taking stock-market risk
Shiller P/E
CAPE ratio, cyclically adjusted P/E
Valuation
FormulaShare price ÷ 10-year average of inflation-adjusted EPS
What it shows
Annual earnings swing with the economy, so a normal P/E looks low in booms and high in downturns. The Shiller P/E smooths this out with ten years of average earnings. It is mainly used for the whole market, such as the S&P 500, to judge whether stocks are overheated.
Rule of thumb
Popularized by Nobel laureate Robert Shiller. Compare it with its own history.
Watch out
A high reading does not tell you when prices will fall.
Trailing vs. forward P/E
Trailing P/E uses reported earnings for the past 12 months: the number is fixed but ignores future growth. Forward P/E uses estimated earnings for the next 12 months: it reflects the future but estimates can be wrong. U.S. companies often do not give earnings forecasts, so the forward P/E usually relies on the analyst consensus.
Same price, different P/E depending on the earnings used
Trailing P/E
Share price$100
÷
EPS, past 12 months$4
＝
Trailing P/E25x
Forward P/E
Share price$100
÷
Est. EPS, next 12 months$5
＝
Forward P/E20x
The faster earnings grow, the lower the forward P/E is relative to the trailing P/E.
GAAP vs. adjusted P/E
U.S. companies often report two profit figures: GAAP earnings that follow the accounting rules, and “adjusted” earnings that exclude certain costs at the company’s discretion. Because adjusted earnings leave out items such as stock-based compensation, acquisition costs and restructuring charges, they tend to be higher than GAAP earnings.
The same company can look cheap or expensive
Using GAAP earnings
Share price$100
÷
GAAP EPS$4
＝
P/E25x
Using adjusted earnings
Share price$100
÷
Adjusted EPS$5
＝
P/E20x
When comparing, stick to one basis.
P/E by sector
Normal P/E levels differ widely across industries. The chart below shows the median trailing P/E of S&P 500 members by sector, calculated from Beikabuzukan data (it updates with the daily data).
Trailing P/E by sector (median)Dotted line: S&P 500 median (23.8x)
Financial Services14.3x
Energy15.0x
Communication Services18.2x
Consumer Cyclical20.6x
Utilities21.8x
Consumer Defensive24.1x
Basic Materials26.3x
Industrials28.3x
Technology29.3x
Healthcare30.3x
Real Estate32.1x
Profitable S&P 500 members only. Real estate (REITs) looks expensive on P/E because building depreciation depresses reported earnings (Chapter 14) (Beikabuzukan data, as of Nov 6)
S&P 500 forward P/E18.7x
5-year average19.8x
10-year average19.1x
FactSet, as of October 30, 2026. Based on next-12-month estimated earnings, so it differs from the trailing P/E in the chart above.
Financials and energy naturally trade at low P/E ratios, so a low P/E there does not necessarily mean cheap. A bank at 15x is ordinary for its industry, while software at 15x is low for its industry. Always compare a stock with its own industry first.
High-P/E and low-P/E companies
High-P/E companies
Low-P/E companies
Typical company
Growth companies expected to grow earnings strongly
Mature companies with slow-growing or stable earnings
Market view
Future growth is priced in, so the price is high relative to today’s earnings
Growth is not expected, or earnings may decline
Common industries
Software, internet, young growth companies
Banks, energy, autos, tobacco
Other reasons
Earnings may have dipped temporarily, inflating the P/E
In cyclical industries, earnings may be temporarily inflated
Watch out
If growth disappoints, the P/E can fall even as earnings rise, and the stock can drop sharply
If earnings keep falling, the stock can stay cheap forever (a value trap)
Key point
A high or low P/E does not mean a good or bad company. It shows how much earnings growth the market expects.
Share price = EPS × P/E
A share price can be written as EPS × P/E. So the price rises only if earnings (EPS) grow or the P/E rises (expectations increase).
Earnings grow 20%, but the price does not move
Today
EPS$5
×
P/E30x
＝
Share price$150
One year later
EPS$6+20%
×
P/E25xexpectations cool
＝
Share price$150
For high-P/E companies, expected growth is already in the price.
How to use it in practice
1
Compare with the company’s own past P/E
Check where today’s P/E sits in its 5–10-year range. A company usually valued at 20–30x now at 18x is valued lower than usual—but find out why: weaker results or a falling market.
2
Compare within the same industry
Normal P/E levels differ by industry. Compare software with software and banks with banks.
3
Read expected growth from trailing vs. forward P/E
A trailing P/E of 25x and a forward P/E of 20x implies earnings about 25% higher over the next 12 months (25 ÷ 20 = 1.25). The bigger the gap, the more growth is expected.
4
For high-P/E stocks, check that growth continues
At 40x, it would take 40 years of today’s earnings to earn back the price. A high P/E only makes sense if earnings keep growing quickly—check sales and earnings growth every quarter.
FormulaShare price ÷ BVPS (= market cap ÷ shareholders’ equity)
What it shows
How many times shareholders’ book value (equity) the company is worth. Equity is assets minus liabilities. A P/B of 1x means the market value equals the book value.
Rule of thumb
Most useful for banks and insurers, whose assets are close to cash. Look at it together with ROE.
Watch out
Many U.S. companies have tiny or negative equity because of buybacks, making P/B extremely high or negative. It also ignores value not on the balance sheet, such as software and brands.
Example$30B market cap ÷ $10B equity = 3x
Beikabuzukan dataS&P 500 median 3.7x (middle half: 2.2x to 7.7x)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanOn the stock page, “Valuation” shows the history; the Screener lets you filter by it
Price to tangible book
P/TBV
Valuation
FormulaMarket cap ÷ (equity − goodwill and other intangibles)
What it shows
Compares the price with equity after removing goodwill from acquisitions and other assets that are hard to sell for cash.
Rule of thumb
Widely used for valuing banks.
Watch out
For companies with large intangibles, tangible equity can be negative and the metric unusable.
Why P/B is tricky for U.S. stocks
A buyback is a company using its own money to buy its shares back from shareholders. The amount paid is deducted from equity. If a company buys back more than it earns, or borrows to buy back stock, equity can turn negative.
How buybacks can make equity negative (example)
Equity today$10B
＋
Annual profit$2B
－
Buybacks$15B
＝
Equity a year later−$3B
The business did not get weaker; the company simply returned a lot of money to shareholders.
Well-known companies with negative equityIn $ billions. All have bought back stock for many years
McDonald’s (Jun 2026)≈ −1.0
AutoZone (Aug 2026)≈ −2.5
Lowe’s (Jul 2026)≈ −7.4
Source: balance sheets in each company’s quarterly report. With negative equity, P/B is also negative and unusable.
In addition, intangible value such as software, brands and technology rarely shows up on the balance sheet, so companies that earn from those strengths show high P/B ratios.
Industries where P/B is useful
P/B is most useful for banks and insurers, for three reasons. First, most of their assets—loans and bonds—are close to cash, so book values are close to real values. Second, they earn by putting those assets to work, so equity is the base of their earning power. Third, regulators require them to hold capital against losses, so buybacks rarely shrink equity dramatically. Note that P/B equals P/E multiplied by ROE (P/B = P/E × ROE, Chapter 15).
High-P/B and low-P/B companies
High-P/B companies
Low-P/B companies
Typical company
Earn a lot with few assets, through software, brands or technology not on the balance sheet
Hold many assets—plants, equipment, loans—and earn with them
Market view
High ROE and continued growth are expected
Low returns, little growth, or assets worth less than book value
Common industries
Software, internet, consumer brands
Banks, insurance, energy, steel
Other reasons
Years of buybacks shrank equity, making P/B look extreme
Results worsened and the share price fell
Watch out
High expectations mean sharp falls if growth slows
Some are truly cheap, but many stay cheap
Key point
A high or low P/B does not mean a good or bad company. It shows whether a company earns from its assets or from other strengths—and how much the market expects.
How to use it in practice
1
Below 1x, find out why it is cheap
A P/B under 1x means you can buy the company for less than its book value. Often the market believes the assets are worth less than book, or that the company barely earns a profit. Check for low ROE and asset quality such as loan losses.
2
Compare with the company’s own past P/B
For banks, see where today’s P/B sits in the 5–10-year range. P/B levels during past downturns also hint at how far the stock could fall.
3
For extreme or negative P/B, separate the causes
If buybacks caused it, P/B is not useful—use P/E or FCF yield instead. If years of losses caused it, it is a warning sign. Buyback amounts and the earnings history tell you which.
4
For serial acquirers, also check price to tangible book
Goodwill from acquisitions cannot be sold for cash. Removing it shows the real valuation.
5
For banks and insurers, look at P/B with ROE
If Banks A and B both earn a 15% ROE but trade at 1.5x and 1.0x book, B offers the same earning power for less. A low-ROE company deserves a low P/B and is not necessarily cheap.
How many times annual sales the company is worth. It works even for loss-making companies, so it is common for unprofitable growth stocks.
Rule of thumb
Levels vary widely by industry: high for high-margin software, low for thin-margin retail.
Watch out
High sales do not guarantee profits. Look at it with gross margin.
Beikabuzukan dataS&P 500 median 3.2x (middle half: 1.7x to 5.9x)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanOn the stock page, “Valuation” shows the history; the Screener lets you filter by it
PEG ratio
Valuation
FormulaP/E ÷ annual EPS growth rate (as a number)
What it shows
A P/E that accounts for growth speed. A 30x P/E means very different things for a company growing 30% a year and one growing 5%.
Rule of thumb
Around 1x is a common benchmark; below 1x is considered cheap for its growth.
Watch out
Growth rates are estimates and can be wrong. It does not work if earnings are flat or falling. Sources differ on which growth rate they use (historical or forecast).
Example30x P/E ÷ 30 growth = PEG of 1x
EV/EBITDA
Valuation
FormulaEV ÷ EBITDA (EBITDA ≈ operating income + depreciation)
What it shows
How many years of near-cash operating profit (EBITDA) the company’s value including debt (EV) represents. EBITDA is earnings before interest, taxes, depreciation and amortization. Useful for comparing companies with different debt levels, countries or accounting rules.
Rule of thumb
Also widely used when pricing acquisitions.
Watch out
EBITDA ignores the cost of replacing equipment, so capital-heavy companies such as manufacturers and telecoms look better than they are.
Beikabuzukan dataS&P 500 median 15.0x (middle half: 11.0x to 20.5x)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanOn the stock page, “Valuation” shows the history; the Screener lets you filter by it
EV/EBIT
Valuation
FormulaEV ÷ EBIT (≈ operating income)
What it shows
Like EV/EBITDA, but uses earnings after depreciation.
Rule of thumb
Closer to reality than EV/EBITDA for companies that must keep replacing equipment.
Watch out
One-off charges that swing operating income also swing this metric.
EV/Sales
Valuation
FormulaEV ÷ revenue
What it shows
The debt-inclusive version of P/S. Useful for comparing companies with very different debt levels by sales.
Watch out
Says nothing about profitability.
Heavily indebted companies look cheap on P/E alone
No debt
Market cap$10B
＋
Debt$0
＝
EV$10B
Heavy debt
Market cap$10B
＋
Debt$5B
＝
EV$15B
Same market cap, but buying the indebted company outright effectively costs $15B (assuming no cash in either).
Cash-flow-based metrics
Price to cash flow
P/CF
Valuation
FormulaMarket cap ÷ operating cash flow
What it shows
Compares the price with cash actually generated by the business instead of earnings. Less affected by accounting adjustments.
Watch out
Capital spending has not been deducted.
P/FCF
Price to free cash flow
Valuation
FormulaMarket cap ÷ free cash flow
What it shows
How many years of free cash flow the company’s value represents.
Watch out
FCF shrinks in years of heavy investment. Companies with large stock-based pay show inflated FCF (Chapter 9).
Beikabuzukan dataS&P 500 median 21.5x (middle half: 14.1x to 31.3x)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanOn the stock page, “Valuation” shows the history; the Screener lets you filter by it
FCF yield
Free cash flow yield
Valuation
FormulaFree cash flow ÷ market cap (= 1 ÷ P/FCF)
What it shows
Free cash generated each year as a percentage of the company’s value. You can read it like a dividend yield.
Rule of thumb
Compare with Treasury yields.
Watch out
Look at several years, not just one.
ExampleA 6% FCF yield vs. a 4.5% 10-year Treasury yield leaves a 1.5-point premium
Beikabuzukan dataS&P 500 median 4.3% (middle half: 2.7% to 6.9%)as of Nov 6; excludes companies where it cannot be calculated
Compare companies with different growth using PEG
Company A at 30x P/E growing 30% a year has a PEG of 1x (30 ÷ 30). Company B at 15x growing 5% has a PEG of 3x (15 ÷ 5). On P/E alone, B looks half the price, but adjusted for growth A is cheaper. If the price stays put and both grow as expected, the P/E on year-five earnings is about 8x for A and about 12x for B—the ranking flips.
P/E today vs. P/E on year-five earningsIf the share price stays the same and earnings grow as expected
A (30% growth): today30x
A: on year-5 earnings≈ 8x
B (5% growth): today15x
B: on year-5 earnings≈ 12x
A: 30 ÷ 1.30^5 ≈ 8.1; B: 15 ÷ 1.05^5 ≈ 11.8. Growth rates are estimates and can miss, and few companies sustain 30% growth for many years.
How to use it in practice
1
For loss-makers, pair P/S with sales growth
With no earnings, P/E does not work, so compare with sales. At the same 10x P/S, a company growing 40% a year becomes cheaper faster than one growing 10%. Higher gross margins make future profits more likely.
2
For indebted companies, compare EV/EBITDA
P/E ignores debt, so indebted companies look cheap. EV levels the playing field.
3
For capital-heavy companies, also use EV/EBIT or FCF yield
EBITDA leaves out equipment replacement costs, flattering manufacturers and network operators.
4
Compare FCF yield with Treasury yields
If the premium is thin, check whether FCF is likely to grow.
Solve for the growth rate that justifies today’s price
Multiples vs. intrinsic value
Multiples such as P/E judge cheapness relative to other companies or the past. Intrinsic value instead asks: based on the cash this company will earn in the future, what is it worth today?
Discounting future cash
$100 today is worth more than $100 a year from now, because money in hand can be invested. Converting future money into today’s value is called discounting, and the rate used is the discount rate. The present value of $100 received in a year is 100 ÷ (1 + discount rate).
Today’s value of $100 received in the futureAt an 8% discount rate. The further away the money, the less it is worth today
Shareholders’ required return and the interest rate on debt, averaged by their weights
Margins
Subtract production costs, then salaries and advertising, then taxes and interest, and the profit left shrinks at each step. Margins show how much is left at each stage.
How $100 of sales becomes profit (example)Each margin means something different depending on the stage
Revenue$100
Gross profit$60
Operating income$25
Net income$20
In this example: gross margin 60%, operating margin 25%, net margin 20%.
Gross margin
Profitability
Formula(Revenue − cost of goods sold) ÷ revenue
What it shows
The share of sales left after the cost of making or buying the product. Shows the strength of the product and the power to raise prices.
Rule of thumb
Levels differ a lot by industry: software is high (often 70–80%), retail low (20–30%).
Watch out
Do not compare across industries.
Beikabuzukan dataS&P 500 median 46.0% (middle half: 32.0% to 63.8%)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanThe stock page “Financials” → “Ratios”
Operating margin
Profitability
FormulaOperating income ÷ revenue
What it shows
Profit from the core business after also subtracting salaries, advertising, R&D and other operating costs.
Rule of thumb
Compare within the industry and check that the trend is rising.
Watch out
One-off restructuring charges can depress a single year.
Beikabuzukan dataS&P 500 median 18.6% (middle half: 11.4% to 27.2%)as of Nov 6; excludes companies where it cannot be calculated
On BeikabuzukanThe stock page “Financials” → “Ratios”
Net margin
Profitability
FormulaNet income ÷ revenue
What it shows
The final profit after taxes and interest as a share of sales.
Watch out
One-off gains such as asset sales can inflate it.
Beikabuzukan dataS&P 500 median 13.1% (middle half: 7.6% to 20.7%)as of Nov 6; excludes companies where it cannot be calculated
EBITDA margin
Profitability
FormulaEBITDA ÷ revenue
What it shows
EBITDA (earnings before interest, taxes, depreciation and amortization) as a share of sales. Used to compare telecoms and other capital-heavy companies.
Watch out
It ignores the cost of replacing equipment, so it overstates real profit.
R&D intensity
R&D to sales
Profitability
FormulaR&D spending ÷ revenue
What it shows
How much of sales goes to developing future products and technology.
Rule of thumb
In tech and pharma, many companies spend 15–20% or more of sales.
Watch out
Heavy R&D makes today’s profit look small but plants seeds for growth. Look at subsequent sales growth too.
ROE, ROA and ROIC
ROE
Return on equity
Profitability
FormulaNet income ÷ shareholders’ equity
What it shows
How much profit the company earned in a year on the money shareholders put in (equity). Higher means shareholder capital is used more efficiently.
Rule of thumb
Compare within the industry. Warren Buffett is known to favor companies that sustain a high ROE for many years.
Watch out
It is also high at companies with lots of debt, or whose equity has shrunk through buybacks. It does not work when equity is negative.
Beikabuzukan dataS&P 500 median 15.5% (middle half: 8.6% to 29.7%)as of Nov 6; excludes companies where it cannot be calculated
How much profit the company earned on all its assets, including those financed by debt. Less affected by leverage.
Rule of thumb
Banks have very large balance sheets, so an ROA around 1% is often considered good.
Watch out
Asset needs differ by industry, so compare within the industry.
Beikabuzukan dataS&P 500 median 6.2% (middle half: 2.9% to 10.8%)as of Nov 6; excludes companies where it cannot be calculated
ROIC
Return on invested capital
Profitability
FormulaAfter-tax operating income ÷ (equity + interest-bearing debt)
What it shows
How much the core business earns on the money invested in it (shareholders’ money and debt). Cash is sometimes subtracted. Used to spot companies with strong competitive positions.
Rule of thumb
Check whether it has exceeded the cost of capital (below) for many years.
Watch out
Calculation methods vary by source. Compare numbers from the same source.
Beikabuzukan dataS&P 500 median 8.9% (middle half: 4.9% to 15.9%)as of Nov 6; excludes companies where it cannot be calculated
Cost of capital (WACC)
Weighted average cost of capital
Profitability
FormulaShareholders’ required return and the interest rate on debt, averaged by their weights
What it shows
The average return shareholders and lenders require from the company. If ROIC exceeds it, the company creates more value than it invests.
Watch out
Shareholders’ required return cannot be observed, so estimates vary.
Breaking down ROE (DuPont analysis)
A 30% ROE means very different things if it comes from high margins or from lots of debt. Splitting ROE into three parts shows the cause. This is called DuPont analysis.
The same 30% ROE, different makeup
Company A: high margins
Net margin30%
×
Asset turnover1.0x
×
Assets ÷ equity1.0xno debt
＝
ROE30%
Company B: heavy debt
Net margin10%
×
Asset turnover1.0x
×
Assets ÷ equity3.0xlots of debt
＝
ROE30%
ROE propped up by debt tends to crumble in a downturn.
How to use it in practice
1
Look at margins as a trend
Look at about five years, not one. An operating margin rising from 15% to 25% suggests pricing power or scale benefits; a steady decline may signal tougher competition.
2
Compare margins within the industry
Companies with higher margins than peers often have strengths such as brands or technology.
3
Separate the drivers of a high ROE
Use DuPont analysis to see whether margins, asset turnover or debt drive it.
4
Use ROIC to find companies that compound capital
Companies whose ROIC beats their cost of capital for years gain value the more they reinvest, and may have a durable .
How much sales grew versus the prior period. U.S. companies report quarterly and usually compare with the same quarter a year earlier (year over year).
Rule of thumb
Watch whether growth is accelerating or slowing.
Watch out
Separate growth from acquisitions from organic growth.
Beikabuzukan dataS&P 500 median 7.9% (middle half: 4.3% to 14.7%)as of Nov 6; excludes companies where it cannot be calculated
Growth in profit per share—what matters to shareholders.
Watch out
Buybacks reduce the share count, so EPS can grow even when total profit does not. Check that net income itself is growing.
Beikabuzukan dataS&P 500 median 11.3% (middle half: 3.7% to 21.0%)as of Nov 6; excludes companies where it cannot be calculated
CAGR
Compound annual growth rate
Growth
Formula(Final value ÷ initial value)^(1 ÷ years) − 1
What it shows
Converts multi-year growth into an average annual rate.
Rule of thumb
Less distorted by one-off booms or slumps than a single year-over-year figure.
Watch out
A start or end year that was unusual (such as the pandemic) skews it.
ExampleRevenue growing from $10B to $20B in five years is about 15% a year
Beikabuzukan dataS&P 500 median 8.6% (middle half: 4.9% to 14.0%)as of Nov 6; excludes companies where it cannot be calculated
15% a year roughly doubles in five yearsA company with $10B in revenue growing 15% every year
100Year 0
115Year 1
132Year 2
152Year 3
175Year 4
201Year 5
Unit: $100M
Calculation: 100 × 1.15^(years).
FCF per share growth
Growth
FormulaGrowth in FCF per share (multi-year annual average)
What it shows
Per-share growth measured in cash.
Watch out
It dips in heavy-investment years, so use multi-year averages.
Guidance and earnings surprises
Guidance
Growth
Formula— (provided by the company with its results)
What it shows
Many U.S. companies give an outlook for next quarter’s or the full year’s revenue and other figures when they report. Raising or cutting guidance moves stocks sharply.
Watch out
Policies differ: some guide conservatively, some do not guide at all.
On BeikabuzukanThe stock page “Dividends & earnings” for the earnings calendar
Formula“Net cash from operating activities” on the cash flow statement
What it shows
Cash actually generated by the business. Unlike earnings, it excludes money not yet received, such as receivables.
Watch out
Delaying supplier payments and similar moves can inflate it temporarily.
On BeikabuzukanThe stock page “Financials” → “Cash flow”
Capex / capex intensity
CapEx · Capital expenditures
Cash flow
FormulaCapital expenditures ÷ revenue
What it shows
Money spent on plants, machinery, data centers and so on, and that spending as a share of sales. Shows how much it costs to maintain or expand the business.
Watch out
Growth investment and maintenance spending mean different things.
Free cash flow (FCF)
FCF
Cash flow
FormulaOperating cash flow − capital expenditures
What it shows
Cash the company can use freely—for dividends, buybacks or paying down debt.
Rule of thumb
Check that it is positive and growing over several years.
Watch out
It can turn negative temporarily during large growth investments.
On BeikabuzukanThe stock page “Financials” → “Cash flow”
FCF margin
Cash flow
FormulaFree cash flow ÷ revenue
What it shows
The share of sales left as free cash flow—how well sales turn into cash.
Rule of thumb
Within an industry, higher-margin companies have more cash for dividends, buybacks and new investment.
Calculating free cash flow
Operating cash flow$1.5B
－
Capex$0.5B
＝
FCF$1.0B
Earnings quality and stock-based pay
Earnings quality
Cash flow
FormulaOperating cash flow ÷ net income
What it shows
Shows whether reported profit is backed by cash.
Rule of thumb
Around 1x or more over long periods means profits turn into cash.
Watch out
Be careful with companies far below 1 for long periods.
Stock-based compensation ratio
SBC
Cash flow
FormulaStock-based compensation ÷ revenue
What it shows
Stock-based pay as a share of sales. Common at U.S. tech companies, it does not use cash and so flatters FCF—but it increases the share count and dilutes shareholders.
Rule of thumb
For high-ratio companies, also calculate FCF after stock-based pay.
Watch out
Buybacks may simply be offsetting the shares issued (Chapter 11).
FCF after stock-based pay (a conservative view)
FCF$1.0B
－
Stock-based pay$0.4B
＝
Real earnings$0.6B
Stock-based pay uses no cash, but it dilutes shareholders, so some treat it as a cost.
Net income vs. FCF over five years (example)A company whose profits leave little cash
Net income (5-yr total)$10B
FCF (5-yr total)$4B
Profits are not becoming cash. Check whether inventory or receivables are building up.
How to use it in practice
1
Compare net income and FCF over several years
Use roughly five-year totals to smooth out annual swings.
2
For heavy stock-based pay, also compute FCF after it
Estimate real earnings conservatively.
3
Look at what the capex is for
Low FCF due to new plants for growth is not necessarily bad.
4
Use FCF margin to compare cash conversion
Compare, within the same industry, how many dollars of every $100 in sales are left as free cash.
The share of assets funded by money that does not have to be repaid (equity). Higher means less reliance on debt.
Watch out
Many U.S. companies have low equity ratios because of buybacks. Metrics that compare debt with earnings (such as net debt/EBITDA) are often more telling.
Issuing shares for stock-based pay or capital raises dilutes each share’s value (). If buybacks do not actually reduce the share count, they are not really returning value.
Rule of thumb
Check that the share count is falling over several years.
Buybacks may barely reduce the share count (example)
Shares retired by buybacks−5%
＋
Shares issued as pay+4%
＝
Actual change−1%
How to use it in practice
1
If the yield suddenly jumps, find out why
A stock that usually yields about 3% now at 6% may have fallen sharply. If results deteriorate and the dividend is cut, the high yield was an illusion.
2
Check that FCF covers the dividend
Make sure the FCF payout ratio is not above 100% year after year.
3
Look at the size of raises, not just the streak
Check that the increases are not shrinking.
4
Judge buybacks by the drop in share count
Net out shares issued as pay and confirm the count is actually falling.
5
For low-dividend U.S. companies, compare shareholder yield
Include buybacks when judging how much is returned.
Shares sold short ÷ shares available to trade (float)
How much the price moves
Beta
Price moves
FormulaCalculated from how the stock moves relative to the market
What it shows
How much the stock moves on average when the market (such as the S&P 500) moves 1%. Above 1 tends to move more than the market; below 1, less.
Rule of thumb
Utilities and consumer staples tend to be lower; tech and small caps higher.
Watch out
It is based on past behavior and may change.
Beikabuzukan dataS&P 500 median 0.94 (middle half: 0.59 to 1.24)as of Nov 6; excludes companies where it cannot be calculated
Average move when the market falls 10% (example)Calculated values for different betas
Beta 1.5−15%
Beta 1.0−10%
Beta 0.5−5%
Actual moves can be much larger because of company-specific news.
Volatility
Price moves
FormulaStandard deviation of returns, annualized
What it shows
How widely the price swings. Higher means a more volatile stock.
Watch out
In market turmoil, it rises for most stocks at once.
Maximum drawdown
Drawdown
Price moves
Formula(Lowest price after a peak − peak) ÷ peak
What it shows
The largest fall from a past high. A guide to how far the stock can drop in a sell-off.
Watch out
It is not a limit on future declines.
Sharpe ratio
Price moves
Formula(Return − risk-free rate) ÷ volatility
What it shows
How efficiently a return was earned relative to the price swings (risk). Higher is more efficient.
Watch out
It is based on past performance and changes a lot with the period chosen.
Trading activity
52-week high / low
Price moves
FormulaThe highest and lowest prices over the past year
What it shows
Shows where today’s price sits within the past year’s range.
Watch out
If it is near the low, find out why before acting.
On BeikabuzukanThe price chart in the stock page “Overview”
Volume / dollar volume
Price moves
FormulaShares traded per day (volume) and their value (dollar volume)
What it shows
How actively the stock trades each day.
Watch out
Thinly traded stocks may be hard to sell at the price you want—especially small caps.
Short interest
% of float
Price moves
FormulaShares sold short ÷ shares available to trade (float)
What it shows
Shares borrowed and sold by investors betting on a decline, as a percentage of the float. High readings mean many investors are pessimistic.
Rule of thumb
Different from the Japanese “short-selling ratio,” which is short sales as a share of a day’s trading value.
Watch out
Good news can force short sellers to buy back in a hurry, sending the price sharply higher.
How to use it in practice
1
Size volatile stocks smaller
A beta of 1.5 implies an average 15% fall when the market drops 10%. Hold a smaller share of your portfolio in volatile stocks to manage overall swings.
2
Use maximum drawdown to test your tolerance
A stock that has halved before can halve again. Decide before buying whether you could hold through that.
3
Be careful with thinly traded stocks
You may not be able to sell at the price you want.
4
If short interest is high, find out why
Check for hidden bad news.
Chapter 13
Market sentiment metrics
These are not calculated; you read them directly from analyst reports or filings with the .
Buy/hold/sell ratings from brokerage analysts and the price they expect within roughly a year.
Rule of thumb
Use the average of many analysts. Watch the direction of changes more than the targets themselves.
Watch out
They are often wrong.
Institutional ownership
13F
Sentiment
Formula— (compiled from Form 13F and other filings)
What it shows
How much of the stock professional investors such as asset managers hold. Institutions managing $100 million or more in U.S. stocks must report their holdings to the SEC within 45 days of each quarter end (Form 13F).
Watch out
The data can be up to about six weeks old, so they may no longer hold the stock.
Quarter endHoldings are fixedPositions as of the end of March, June, September and December
Within 45 daysFiled with the SEC (Form 13F)Many institutions file right before the deadline
After filingPublic to anyoneBut up to about six weeks old—positions may have been sold since
Insider transactions
Sentiment
Formula— (compiled from Form 4)
What it shows
When officers and directors buy or sell company stock, they generally must report it to the SEC within two business days (Form 4). These are legal, rule-based trades—not illegal insider trading.
Rule of thumb
Several insiders buying meaningful amounts with their own money tends to be read as a sign of confidence.
Watch out
Sales are often for taxes or diversification, and many follow pre-arranged plans, so do not read too much into selling alone.
How to use it in practice
1
Watch the direction of changes, not the targets
Multiple analysts upgrading or raising earnings estimates is more informative.
2
Use the consensus as the yardstick for earnings
Stocks usually move on whether results beat or miss consensus. Check it before the report.
3
Treat institutional holdings as past information
If you copy a famous investor, remember they may have sold since.
4
Focus on insider buying
Do not turn pessimistic on selling alone.
Chapter 14
Industry-specific metrics
In some industries, general metrics such as P/E miss the picture, so industry-specific measures are used.
FFO, AFFO, P/FFO, occupancy, NOI (net operating income from properties)
Large building depreciation makes net income misleading
Banks
P/B, price to tangible book, ROE, net interest margin, efficiency ratio, CET1 ratio
Assets and liabilities are the business itself
Property & casualty insurance
Combined ratio, P/B
Shows whether underwriting itself is profitable
Software (SaaS)
ARR, net revenue retention (NRR), Rule of 40, RPO (contracted revenue not yet recognized)
Many prioritize growth over profit
Internet & social media
Monthly / daily active users (MAU / DAU), ARPU
User numbers and monetization drive revenue
Telecom
ARPU, churn, net subscriber additions
Revenue comes mainly from subscribers
Retail & restaurants
Same-store sales, inventory turnover
Separates growth from new stores and store productivity
Semiconductors & equipment
, book-to-bill, days inventory
Shows the outlook for future sales and the cycle
Energy
Production, proved reserves, breakeven oil price
Results swing with oil and gas prices
Pharma & biotech
Pipeline, patent expirations, cash runway
Future sales depend on new drugs succeeding
Key industry metrics
FFO
AFFO · Funds from operations
Industry
FormulaNet income + real estate depreciation − gains on property sales
What it shows
A measure of cash generated by a REIT’s operations. Buildings lose value on paper every year (depreciation) while real property values often do not fall, so FFO is used instead of net income.
Rule of thumb
AFFO further subtracts building maintenance costs and similar items, getting closer to the capacity to pay dividends.
Watch out
Calculation details vary by company.
P/FFO
Price to FFO
Industry
FormulaShare price ÷ FFO per share
What it shows
The REIT version of P/E.
Watch out
Levels differ by property type (data centers, warehouses, offices).
Net interest margin
NIM
Industry
Formula(Interest income − interest expense) ÷ interest-earning assets
What it shows
A bank’s spread: the gap between interest earned on loans and interest paid on deposits and other funding.
Watch out
It changes significantly with interest rates.
CET1 ratio
Common equity Tier 1 ratio
Industry
FormulaCore common equity capital ÷ risk-weighted assets
What it shows
The thickness of a bank’s capital cushion against losses. Regulators set minimum levels.
Rule of thumb
Comfortably above the requirement leaves room for dividends and buybacks.
Combined ratio
Industry
Formula(Claims paid + expenses) ÷ premiums
What it shows
Shows whether a property and casualty insurer profits from underwriting itself.
Rule of thumb
Below 100% means the core insurance business is profitable.
Watch out
It deteriorates sharply in years with major natural disasters.
A SaaS benchmark for balancing growth and profitability.
Rule of thumb
A total of 40% or more is considered a healthy balance.
Watch out
Sources differ on which margin to use.
Example30% revenue growth + 15% FCF margin = 45%
ARPU
Average revenue per user
Industry
FormulaRevenue ÷ number of users
What it shows
Revenue per user. Used for internet services and telecoms to gauge monetization.
Watch out
It varies greatly by region.
Same-store sales
Comparable sales, comps
Industry
FormulaYear-over-year sales at stores open at least a year
What it shows
For retailers and restaurants, measures store productivity excluding growth from new openings.
Watch out
Definitions vary, e.g. whether online sales are included.
Book-to-bill ratio
Industry
FormulaOrders ÷ revenue
What it shows
For semiconductor and equipment makers, shows how many orders are coming in.
Rule of thumb
Above 1 means more orders than sales, pointing to higher future sales.
Chapter 15
How the metrics connect
Metrics may look unrelated, but many are linked. Knowing the links helps you separate why a number changed.
Four relationships worth remembering
P/B, P/E and ROE
P/E20x
×
ROE15%
＝
P/B3x
Earnings yield and P/E
11
÷
P/E20x
＝
Earnings yield5%
Breaking down ROE (DuPont)
Net margin10%
×
Asset turnover1.0x
×
Assets ÷ equity1.5x
＝
ROE15%
PEG ratio
P/E20x
÷
Annual EPS growth20
＝
PEG1x
FCF yield and P/FCF relate the same way as earnings yield and P/E (FCF yield = 1 ÷ P/FCF).
What P/B = P/E × ROE tells you
Companies with a high ROE tend to have a high P/B. Before calling a high-P/B stock expensive, check its ROE. Conversely, a company with a low ROE and a high P/E will look expensive on P/B too.
Chapter 16
Pitfalls when using metrics
1
Compare like with like
Compare with peers in the same industry and with the company’s own history. Do not compare metrics across industries as-is.
2
Do not rely on one metric
Combine valuation, profitability, growth and safety.
3
Cheap is often cheap for a reason
A company whose results are deteriorating is not necessarily cheap, even at a low P/E.
4
Estimates can be wrong
Forward P/E and PEG are based on analyst estimates.
5
The same name can mean different numbers
Sites and sources differ: trailing vs. forward, adjusted vs. GAAP.
6
One-offs can swing metrics
Acquisitions, asset sales and taxes can move a metric sharply for a single year.
Metrics look different by type of stock
Type of stock
How the metrics look
What to check
Growth stocks
High P/E and P/S; little or no dividend
Whether sales and earnings growth continue; whether PEG or a reverse DCF suggests excessive expectations
Cyclical stocks
Low P/E at peak earnings, high P/E in downturns
Use P/B, multi-year average earnings and order trends rather than P/E
High-dividend stocks
High dividend yield, often a lowish P/E
Room in the payout and FCF payout ratios; whether the yield is high only because the price fell
Loss-making growth companies
P/E unusable; high P/S
Sales growth, gross margin, cash runway and share count growth
Chapter 17
In practice ①: finding stocks by goal
Narrowing down stocks by metric conditions is called screening. Which metrics matter depends on your goal. The conditions below are examples; the links open Beikabuzukan’s screener with those conditions set (you can change them freely).
Goal
Example conditions
Watch out
Try it
Growth stocks
Revenue up 20%+ a year over 3 years, gross margin 50%+, market cap $10B+
The conditions are examples and not a recommendation to buy or sell any stock. Do not invest based on screening results alone—check each company individually.
Chapter 18
In practice ②: analyzing one stock step by step
When researching a single stock, going through it in this order helps you miss less.
STEP 1Understand the businessHow it makes money and which industry-specific metrics apply
STEP 2GrowthFive years of sales and EPS growth; whether growth is accelerating or slowing in recent quarters
STEP 3ProfitabilityWhether margins and ROIC are rising and above peers
STEP 4Cash flowWhether FCF matches net income; whether stock-based pay is excessive
STEP 5SafetyWhether earnings can cover the debt and the interest burden is manageable
STEP 6Shareholder returnsDividends and buybacks; whether the share count is actually falling
STEP 7ValuationPast P/E range, peer comparison, and the growth implied by today’s price (reverse DCF)
STEP 8Write down your conclusionRecord why you bought and, in terms of metrics, what would change your mind
Case study: a lower P/E is not always cheaper
Let’s compare two hypothetical companies, A and B, using the same steps.
Company A (fast growth)
Company B (slow growth)
P/E
35x
12x
Annual EPS growth (past 5 years)
25%
3%
PEG ratio
1.4x
4.0x
ROIC
25%
7%
FCF ÷ net income
1.1x
0.7x
Net debt / EBITDA
−0.5x (more cash than debt)
3.5x
On P/E alone, B looks cheaper. But A has the lower PEG once growth is considered, and it also leads on ROIC, earnings quality and balance-sheet strength. B’s low P/E can be read as the market pricing in its slow growth and heavy debt. Which stock is cheaper is not decided by the lower P/E alone.
Companies A and B are hypothetical. A also carries the risk of a sharp fall if growth disappoints.
Chapter 19
In practice ③: after you buy, and common mistakes
What to check every quarter
Sales and EPS growth, margins, guidance, FCF and share count
Whether your reasons for buying still hold, checked against the metrics you wrote down
If the price rises and the P/E moves far above its past range, whether too much optimism is priced in
Common mistakes
1
Buying just because the P/E is low
You can fall into a “value trap,” where results keep declining and the stock stays cheap forever.
2
Choosing on dividend yield alone
The yield may look high only because the price fell—followed by a dividend cut.
3
Looking only at adjusted earnings
The adjusted earnings companies highlight tend to look better than GAAP earnings.
4
Judging on one quarter or short-term moves
Look at trends over several quarters and years.
5
Reading U.S. P/B like other markets’
Buybacks give many U.S. companies extremely high P/B ratios, so benchmarks from markets such as Japan do not apply.
6
Comparing metrics across industries
Normal levels differ by industry, so compare within the same industry.
Chapter 20
Checking metrics on Beikabuzukan
Each stock page on Beikabuzukan shows many of the metrics in this guide. We suggest checking them in this order.
STEP 1GrowthIn “Financials” → “Income statement,” check the trend in sales and earnings.Example: Microsoft →
STEP 2ProfitabilityIn “Financials” → “Ratios,” check margins and ROE over time.
STEP 3Cash flow and safetyIn “Financials” → “Cash flow” and “Balance sheet,” check FCF and debt.
STEP 4Shareholder returnsIn “Dividends & earnings,” check the dividend history and earnings results.Example: Coca-Cola →
STEP 5ValuationIn “Valuation,” see the history of P/E, EV/EBITDA, P/S, P/B and P/FCF and whether today is high or low in the range.
STEP 6Compare with peersUse “Compare” to line up metrics against companies in the same industry.Open Compare →
Checklists by goal
Growth stock checklistSales growing about 20%+ a year / growth not slowing / high gross margin / positive FCF or a visible path to profit / share count not ballooning from stock-based pay / PEG and past P/E range not signaling excessive expectations
High-dividend stock checklistYield not extremely high versus its own history / room in the payout and FCF payout ratios / dividend streak intact with raises holding up / debt not too heavy (net debt/EBITDA)
Quality company checklistROIC consistently high / operating margin high and stable / FCF close to net income / little debt / share count falling
Chapter 21
Frequently asked questions
Q. What P/E counts as cheap?
There is no fixed level. The S&P 500’s forward P/E is 18.7x (as of October 30, 2026), but normal levels differ widely by industry. Judge against peers in the same industry and the company’s own 5–10-year P/E range. For companies with different growth rates, also use the PEG ratio.
Q. Is a stock below 1x book value cheap?
You cannot tell from that alone. It means you can buy the company for less than its book value, but often the market believes the assets are worth less than book or that the company barely makes a profit. Check ROE and asset quality. In the U.S., many companies have extremely high P/B ratios because of buybacks, and P/B is hard to use in some industries.
Q. Is a higher dividend yield always better?
Be careful with very high yields. A yield may look high only because the price has fallen, and if results deteriorate and the dividend is cut, the high yield was an illusion. Check that the payout ratio and FCF payout ratio leave room.
Q. How do you value a loss-making company?
P/E does not work, so use P/S (market cap ÷ revenue), sales growth and gross margin. For SaaS companies, the Rule of 40 also helps. Check the cash runway and how fast the share count is growing from stock sales.
Q. Do rules of thumb differ between U.S. and other markets?
Yes. Many U.S. companies have small equity because of buybacks, so P/B, ROE and the equity ratio look very different from markets such as Japan. Also pay attention to items more common at U.S. companies, such as stock-based compensation and adjusted earnings.
Q. Where can I check these metrics?
Each stock page on Beikabuzukan shows the history of P/E, P/B, EV/EBITDA and more, along with financial trends and dividends. Use the Screener to filter by conditions and Compare to line up peers. You can also check the original filings with the SEC (annual report 10-K, quarterly report 10-Q).
Summary
The share price alone does not tell you whether a stock is cheap or expensive. You can only judge by comparing it with earnings, assets or sales.
P/E shows how many years of earnings you are paying; P/B shows how many times book value. In the U.S., buybacks give many companies extremely high P/B ratios, so use P/B with care.
Combine different kinds of metrics—not just valuation, but profitability, efficiency, growth, cash flow, financial safety and shareholder returns.
Compare metrics with industry peers and the company’s own history. Some industries use their own metrics, such as FFO for REITs and net interest margin for banks.
Appendix
Appendix: quick reference
Every metric in this guide in one table. Filter by name or by group. English names are included to help when you read U.S. filings and financial sites.
MetricGroupFormulaWhat it shows
Market capitalizationBasicsShare price × shares outstandingThe value the stock market puts on the whole company.
EVEnterprise valueBasicsMarket cap + − cashThe price of buying the whole company, including its debt.
P/E ratioValuationShare price ÷ EPS (= market cap ÷ net income)How many years of current earnings the company’s value represents, assuming earnings stay the same.
Earnings yieldValuationEPS ÷ share price (= 1 ÷ P/E)The inverse of P/E: the earnings generated each year as a percentage of the share price.
Shiller P/EValuationShare price ÷ 10-year average of inflation-adjusted EPSAnnual earnings swing with the economy, so a normal P/E looks low in booms and high in downturns.
P/B ratioValuationShare price ÷ BVPS (= market cap ÷ shareholders’ equity)How many times shareholders’ book value (equity) the company is worth.
Price to tangible bookValuationMarket cap ÷ (equity − and other intangibles)Compares the price with equity after removing goodwill from acquisitions and other assets that are hard to sell for cash.
P/S ratioValuationMarket cap ÷ revenueHow many times annual sales the company is worth.
PEG ratioValuationP/E ÷ annual EPS growth rate (as a number)A P/E that accounts for growth speed.
EV/EBITDAValuationEV ÷ EBITDA (EBITDA ≈ operating income + )How many years of near-cash operating profit (EBITDA) the company’s value including debt (EV) represents.
EV/EBITValuationEV ÷ EBIT (≈ operating income)Like EV/EBITDA, but uses earnings after depreciation.
EV/SalesValuationEV ÷ revenueThe debt-inclusive version of P/S.
Price to cash flowValuationMarket cap ÷ operating cash flowCompares the price with cash actually generated by the business instead of earnings.
P/FCFValuationMarket cap ÷ free cash flowHow many years of free cash flow the company’s value represents.
FCF yieldValuationFree cash flow ÷ market cap (= 1 ÷ P/FCF)Free cash generated each year as a percentage of the company’s value.
Intrinsic value (DCF)Discounted cash flowValuation(Sum of discounted future FCF + cash − debt) ÷ shares outstandingForecast future FCF, discount each year back to today and add them up.
Dividend discount modelValuationNext year’s DPS ÷ (discount rate − dividend growth rate)Discounts all future dividends to today’s value (this form assumes dividends grow at a constant rate).
Reverse DCFValuationSolve for the growth rate that justifies today’s priceRuns a DCF backward to reveal how much future growth the current share price assumes.
Gross marginProfitability(Revenue − cost of goods sold) ÷ revenueThe share of sales left after the cost of making or buying the product.
Operating marginProfitabilityOperating income ÷ revenueProfit from the core business after also subtracting salaries, advertising, R&D and other operating costs.
Net marginProfitabilityNet income ÷ revenueThe final profit after taxes and interest as a share of sales.
EBITDA marginProfitabilityEBITDA ÷ revenueEBITDA (earnings before interest, taxes, depreciation and amortization) as a share of sales.
R&D intensityProfitabilityR&D spending ÷ revenueHow much of sales goes to developing future products and technology.
ROEReturn on equityProfitabilityNet income ÷ shareholders’ equityHow much profit the company earned in a year on the money shareholders put in (equity).
ROAReturn on assetsProfitabilityNet income ÷ total assetsHow much profit the company earned on all its assets, including those financed by debt.
ROICReturn on invested capitalProfitabilityAfter-tax operating income ÷ (equity + interest-bearing debt)How much the core business earns on the money invested in it (shareholders’ money and debt).
Cost of capital (WACC)Weighted average cost of capitalProfitabilityShareholders’ required return and the interest rate on debt, averaged by their weightsThe average return shareholders and lenders require from the company.
Asset turnoverEfficiencyRevenue ÷ total assetsHow many times its assets the company generated in sales.
Days inventory outstandingEfficiencyInventory ÷ cost of goods sold × 365The average number of days it takes to sell inventory.
Days sales outstandingEfficiencyAccounts receivable ÷ revenue × 365The average number of days between a sale and collecting payment.
Days payables outstandingEfficiencyAccounts payable ÷ cost of goods sold × 365The average number of days between buying from suppliers and paying them.
Cash conversion cycleEfficiencyDays inventory + days sales outstanding − days payables outstandingThe number of days between paying suppliers and collecting from customers.
Revenue growthGrowth(This period’s revenue − prior period’s revenue) ÷ prior period’s revenueHow much sales grew versus the prior period.
EPS growthGrowth(This period’s EPS − prior period’s EPS) ÷ prior period’s EPSGrowth in profit per share—what matters to shareholders.
CAGRCompound annual growth rateGrowth(Final value ÷ initial value)^(1 ÷ years) − 1Converts multi-year growth into an average annual rate.
FCF per share growthGrowthGrowth in FCF per share (multi-year annual average)Per-share growth measured in cash.
GuidanceGrowth— (provided by the company with its results)Many U.S.
Earnings surpriseGrowth(Actual − consensus estimate) ÷ consensus estimateHow far actual results beat or missed the analyst consensus.
Operating cash flowCash flow“Net cash from operating activities” on the cash flow statementCash actually generated by the business.
Capex / capex intensityCapital expendituresCash flowCapital expenditures ÷ revenueMoney spent on plants, machinery, data centers and so on, and that spending as a share of sales.
Free cash flow (FCF)Cash flowOperating cash flow − capital expendituresCash the company can use freely—for dividends, buybacks or paying down debt.
FCF marginCash flowFree cash flow ÷ revenueThe share of sales left as free cash flow—how well sales turn into cash.
Earnings qualityCash flowOperating cash flow ÷ net incomeShows whether reported profit is backed by cash.
Equity ratioSafetyShareholders’ equity ÷ total assetsThe share of assets funded by money that does not have to be repaid (equity).
Debt-to-equity ratioSafetyInterest-bearing debt ÷ shareholders’ equityHow many times shareholders’ equity the company has borrowed.
Net debt / EBITDASafety(Interest-bearing debt − cash) ÷ EBITDAHow many years of annual earnings (EBITDA) it would take to cover debt net of cash.
Net cashSafetyCash − interest-bearing debtMore cash than debt: the company could repay all debt and still have money left.
Interest coverage ratioSafetyOperating income ÷ How many times operating profit covers interest on debt.
Current ratioSafetyCurrent assets ÷ current liabilitiesAssets that turn into cash within a year versus liabilities due within a year—short-term ability to pay.
Quick ratioSafety(Cash + receivables + short-term securities) ÷ current liabilitiesA stricter version of the current ratio that excludes inventory, which cannot be turned into cash quickly.
Cash runwaySafetyCash ÷ annual cash burnHow many years a loss-making company can keep operating on its current cash.
Credit ratingSafety— (assigned by rating agencies)An assessment of a company’s ability to repay debt by agencies such as S&P, Moody’s and Fitch.
Altman Z-scoreSafetyA formula combining several financial ratiosMeasures bankruptcy risk.
Dividend yieldReturnsDPS ÷ share priceAnnual dividends as a percentage of the share price.
Payout ratioReturnsTotal dividends ÷ net income (= DPS ÷ EPS)The share of profits paid out as dividends.
FCF payout ratioReturnsTotal dividends ÷ free cash flowShows whether dividends are covered by free cash flow.
Dividend growth rateReturnsGrowth in DPS (multi-year annual average)How fast the dividend per share has grown on average each year.
Consecutive dividend increasesReturnsNumber of years in a row the dividend has been raisedHow many consecutive years the company has increased its dividend.
Buyback yieldReturnsBuybacks ÷ market capMoney spent on buybacks in a year as a percentage of the company’s value.
Shareholder yieldReturns(Total dividends + buybacks) ÷ market capDividends and buybacks combined, as a percentage of the company’s value.
Change in share count (dilution)Returns(Current shares − prior shares) ÷ prior sharesIssuing shares for stock-based pay or capital raises dilutes each share’s value (dilution).
BetaPrice movesCalculated from how the stock moves relative to the marketHow much the stock moves on average when the market (such as the S&P 500) moves 1%.
VolatilityPrice movesStandard deviation of returns, annualizedHow widely the price swings.
Maximum drawdownPrice moves(Lowest price after a peak − peak) ÷ peakThe largest fall from a past high.
Sharpe ratioPrice moves(Return − risk-free rate) ÷ volatilityHow efficiently a return was earned relative to the price swings (risk).
52-week high / lowPrice movesThe highest and lowest prices over the past yearShows where today’s price sits within the past year’s range.
Volume / dollar volumePrice movesShares traded per day (volume) and their value (dollar volume)How actively the stock trades each day.
Short interestPrice movesShares sold short ÷ shares available to trade (float)Shares borrowed and sold by investors betting on a decline, as a percentage of the float.
Analyst ratings and price targetsSentiment— (published by brokerage analysts)Buy/hold/sell ratings from brokerage analysts and the price they expect within roughly a year.
Institutional ownershipSentiment— (compiled from Form 13F and other filings)How much of the stock professional investors such as asset managers hold.
Insider transactionsSentiment— (compiled from Form 4)When officers and directors buy or sell company stock, they generally must report it to the SEC within two business days (Form 4).
FFOFunds from operationsIndustryNet income + real estate depreciation − gains on property salesA measure of cash generated by a REIT’s operations.
P/FFOIndustryShare price ÷ FFO per shareThe REIT version of P/E.
Net interest marginIndustry(Interest income − interest expense) ÷ interest-earning assetsA bank’s spread: the gap between interest earned on loans and interest paid on deposits and other funding.
CET1 ratioCommon equity Tier 1 ratioIndustryCore common equity capital ÷ risk-weighted assetsThe thickness of a bank’s capital cushion against losses.
Combined ratioIndustry(Claims paid + expenses) ÷ premiumsShows whether a property and casualty insurer profits from underwriting itself.
ARRAnnual recurring revenueIndustryAnnual recurring revenue (e.g. monthly recurring revenue × 12)The recurring revenue a software (SaaS) company can expect over a year.
Net revenue retention (NRR)IndustryThis year’s revenue from existing customers ÷ last year’s revenue from the same customersHow much existing customers expanded their spending in a year, net of cancellations.
Rule of 40IndustryRevenue growth + profit margin (e.g. FCF margin)A SaaS benchmark for balancing growth and profitability.
Same-store salesIndustryYear-over-year sales at stores open at least a yearFor retailers and restaurants, measures store productivity excluding growth from new openings.
Book-to-bill ratioIndustryOrders ÷ revenueFor semiconductor and equipment makers, shows how many orders are coming in.
No match.
88 metrics.
Glossary
Interest-bearing debt
Debt that carries interest, such as bank loans and bonds.
Stock-based compensation
Paying part of employees’ pay in company shares instead of cash. No cash leaves, but the share count rises, so it is a real cost to shareholders.
Convertible note
Debt that can later be converted into shares on preset terms. The higher the company’s share value, the more the lender’s right is worth.
Share buyback
A company buying back its own shares from the market. Alongside dividends, it is one of the main ways companies return cash to shareholders.
TTM
The most recent 12 months. The latest four quarters are added together and used as the most up-to-date full year of results.
GAAP
The accounting rules U.S. companies follow when preparing their financial statements. Figures that follow them are called “GAAP” figures.
Goodwill
The amount by which an acquisition price exceeds the acquired company’s net assets. It pays for invisible value such as brands and customer relationships and is hard to sell for cash.
Depreciation
The cost of assets such as factories and machinery, spread out as an annual expense over the years they are used.
Durable competitive advantage
A strength that competitors find hard to copy and that can last for decades. Warren Buffett compares it to a moat protecting a castle.
Interest expense
The interest a company pays on its borrowings.
Dilution
When new shares are issued and existing shareholders’ per-share value or ownership shrinks.
SEC
The US government agency that sets and enforces the disclosure rules for publicly listed companies.
Backlog
Orders a company has received but not yet delivered or recorded as revenue. A larger backlog gives more visibility into future sales.
P/E by sector and metric medians: Beikabuzukan data (S&P 500 members, updated daily)
This column explains what investment metrics mean and how to use them; it does not recommend buying or selling any security. Example figures are for illustration, and figures for real companies are as of the dates stated. Please make your own investment decisions after checking the latest company filings.