What is a good stock ratio?
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio.
A P/B ratio of 1 indicates the company's shares are trading in line with its book value. A P/B higher than 1 suggests the company is trading at a premium to book value, and lower than 1 indicates a stock that may be undervalued relative to the company's assets.
The ideal inventory turnover ratio varies by industry. Generally, a ratio within the industry average is desirable. However, a healthy range is typically 4 to 6 times annually. It reflects efficient inventory management while ensuring products are available to meet customer demand and maintain cash flow.
To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.
A healthy current ratio is between 1.2 and 2, indicating that the company has twice as many current assets as liabilities to cover its debts. A current ratio of less than one will indicate that the company lacks sufficient liquid assets to satisfy its short-term liabilities.
Although that percentage can vary depending on your income, savings, and debts. “Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management.
How the Risk/Reward Ratio Works. In many cases, market strategists find the ideal risk/reward ratio for their investments to be approximately 1:3, or three units of expected return for every one unit of additional risk.
Generally speaking, a good quick ratio is anything above 1 or 1:1. A ratio of 1:1 would mean the company has the same amount of liquid assets as current liabilities. A higher ratio indicates the company could pay off current liabilities several times over.
While the ideal ratio depends on the company and industry, the P/S ratio is typically good when the value falls between one and two. A price-to-sales ratio with a value less than one is better.
Average PE of Nifty in the last 20 years was around 20.* So PEs below 20 may provide good investment opportunities; lower the PE below 20, more attractive the investment potential.
Is a 200 PE ratio good?
A P/E ratio of 200 is high. But it is basically saying that people expect the company to grow earnings to be 15 to 20 times as large as they are now (so the P/E ratio would be 10 to 15). If you don't think that the company has that kind of potential, don't invest.
If a stock's price rises, you need to pay close attention when a stock gets bid up to an excessively high P/E level. In the heat of a bull market, it's not uncommon to find "hot" stocks trading at a P/E of 50 or more. While this can go on for some time, eventually the stock's price may drop.
As a general rule, a current ratio below 1.00 could indicate that a company might struggle to meet its short-term obligations, whereas ratios of above 1.00 might indicate a company is able to pay its current debts as they come due.
A quick ratio below 1 signals that a company may not have enough liquid assets to cover its liabilities, pointing to potential liquidity problems.
Price-earnings ratio (P/E)
A high P/E ratio could mean the stocks are overvalued. Therefore, it could be useful to compare competitor companies' P/E ratios to find out if the stocks you're looking to trade are overvalued. P/E ratio is calculated by dividing the market value per share by the earnings per share (EPS).
What is considered a “good” or "bad" P/B ratio depends on the industry in which the company is operating and the overall state of valuations in the market. Generally speaking, a P/B ratio under 1.0 is considered optimal since it indicates that an undervalued stock may have been identified.
If you are a moderate-risk investor, it's best to start with a 60-30-10 or 70-20-10 allocation. Those of you who have a 60-40 allocation can also add a touch of gold to their portfolios for better diversification. If you are conservative, then 50-40-10 or 50-30-20 is a good way to start off on your investment journey.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Understanding the Rule of 90
According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.
The golden ratio of 1.618 – the magic number – gets translated into three percentages: 23.6%, 38.2% and 61.8%. These are the three most popular percentages, although some traders will also look at the 50% and 76.4% levels.
What is the 1 rule in trading?
Enter the 1% rule, a risk management strategy that acts as a safety net, safeguarding your capital and fostering a disciplined approach to navigate the market's turbulent waters. In essence, the 1% rule dictates that you never risk more than 1% of your trading capital on a single trade.
Obviously, a higher current ratio is better for the business. A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts.
What is a good short interest? Short interest as a percentage of float below 10% indicates strong positive sentiment. Short interest as a percentage of float above 10% is fairly high, indicating significant pessimistic sentiment.
Anything above 1.0 shows that a company can pay off outstanding debts and still have a surplus of cash left. There is no ideal figure, but a cash ratio is considered good if it is between 0.5 and 1.
The ideal stock to sales ratio tends to be between 0.167 and 0.25 — but for growing ecommerce businesses, the value can be higher to account for growing order volumes.
