| Return on equity (ROE) | Earnings relative to the amount invested by shareholders
ROE =
Net income
/ Shareholders’ equity | It shows how profitable a company is, and particularly, how good it is in using shareholders’ investment to generate earnings. |
| Earnings per share (EPS) | Amount of earnings allocated to each common stock
EPS =
(Net Income - Dividends on Preferred Stock / Average Outstanding Shares) | It shows how profitable a company is, and particularly its ability to distribute dividends or reinvest earnings for future growth.
A comparison of EPS over the years will give a sense of a company’s growth. |
| Dividend payout ratio | Ratio of earnings paid out in dividends to shareholders.
Dividend payout ratio =
Dividends per share / Earnings per share | It shows the ability of a company to continue to pay a certain dividend.
A high dividend payout ratio indicates that a company is paying more dividends than keeping its earnings. |
| Market capitalisation (market cap) | Market value of all outstanding shares of a company.
Market cap = Price per share x Total number of shares outstanding | It is a measure of the company's worth. |
