What Is Investment Valuation Ratio And Its Type?

Definition of Investment Valuation Ratio and Types – Investment Valuation Ratio is a ratio used to get the value of a company’s stock.

This Valuation Ratio is quite popular and is widely used by investors to determine their decision to invest in the stock market because it can clearly provide a picture of the relationship between investment costs and the benefits they obtain.

With this Investment Valuation Ratio, Investors can determine whether a company’s shares are “expensive” or “cheap”.

Types of Investment Valuation Ratios

There are several types of Valuation Ratios that are often used to assess “value” of a company, including  Dividend Yield, Price to Earnings Ratio (PER), Price to Sales Ratio (PSR), Price to Book Value Ratio (PBVR) and Price Cash Flow Ratio (PCFR).

Dividend Yield

Dividend Yield or Dividend Ratio is an investment valuation ratio that compares the amount of cash dividends distributed to shareholders with share prices (Dividends per Share / Market Value per Share).

Dividend Yield which is usually expressed as a percentage (%) is often used to calculate the cash (cash) that they get from the results of their investment in shares. With this Dividend Yield, Investors can find out how much dividend they will get on each Dollar that they invest in a stock.

Please to also read What is Dividend Yields Definition And Its Formulas.

Price to Earnings Ratio (PER)

Price to Earnings Ratio or often abbreviated as PER (P / E Ratio) is an investment valuation ratio that compares the current price per share of a company with its earnings per share (Price per Share / Earning per Share).

By calculating the P / E Ratio or  Price Earnings Ratio, we can find out how much the price to be paid by the market against the income or profit of a company.

Please to also read What is Price to Earnings Ratio (PER) and its Formula.

Price to Sales Ratio (PSR)

Price to Sales Ratio (PSR or P / S Ratio) is an investment valuation ratio that compares a company’s stock price with its annual sales (Price per share / Revenue per share). Similar to Price to Earnings Ratio (PER) and Price / Earnings to Growth Ratio (PEG), Price to Sales Ratio (PSR) is usually also used to measure the value of a company’s stock.

Please to also read Definition of Price to Sales Ratio (PSR) and the Formula.

Price to Book Value Ratio (PBVR)

Price to Book Value (PBV) is an investment valuation ratio that is often used by investors to compare the market value of a company’s stock with its book value (Price per share / Book Value per share).

This PBV ratio shows how many shareholders are financing the company’s net assets. This ratio helps investors to compare the market value or the price of the shares they pay per share with the traditional measure of the value of a company.

Please to also read Definition of Price to Book Value Ratio (PBVR) and the Formula.

Price to Cash Flow Ratio (PCFR)

Price to Cash Flow Ratio (PCFR or P / CF Ratio) is an investment valuation ratio that compares a company’s stock price with that company’s cash flow (Price per share / Cash Flow per share). In other words, the Price to Cash Flow ratio shows the amount of money that investors are willing to pay for cash flow generated by the company.

Please to also read the Definition of Price Cash Flow Ratio (PCFR) and the Formula.

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