The Stock Valuation Cheat Sheet
The ten numbers that actually decide whether a stock is cheap, growing and safe — and how to read each. Bookmark or print this page.
| Metric | What it is | How to read it |
|---|---|---|
| P/E (price / earnings) | Price per $1 of annual profit. | Lower can mean cheaper — but only vs peers & growth. High P/E needs high growth to justify. |
| Forward P/E | P/E using next year’s expected earnings. | Better than trailing for growing firms. Compare to the sector median. |
| EV/EBITDA | Enterprise value vs operating cash earnings. | Ignores capital structure — best for comparing across debt levels. Lower = cheaper. |
| P/S (price / sales) | Price per $1 of revenue. | Useful for unprofitable/growth names. Only compare within an industry. |
| FCF yield | Free cash flow ÷ market cap. | Higher = more cash returned potential. Above ~5% is attractive for mature firms. |
| Revenue CAGR (3y) | Annualised revenue growth. | The #1 long-term return driver. 20%+ is high growth; <6% is mature. |
| Operating margin | Operating profit ÷ revenue. | Pricing power & efficiency. Rising margins are a great sign. |
| ROIC | Return on invested capital. | Above ~15% signals a durable competitive advantage (a moat). |
| Net debt / EBITDA | Leverage vs earnings. | Lower = safer. Above ~3× is risky in a downturn. |
| Dividend yield + payout | Income per $ invested & % of profit paid. | High yield + very high payout can be unsustainable — check both. |
The six-factor framework we score every comparison on
- Valuation — cheaper on the multiples that matter.
- Growth — faster revenue & earnings compounding.
- Quality — higher margins and ROIC (a moat).
- Balance sheet — lower leverage, more resilience.
- Income — dividend + buyback yield.
- Momentum — multi-year shareholder returns.
Educational only, not investment advice. Always do your own research.