Valuation indicators are important factors to measure whether a stock or fund is worth investing. Valuation indicators can include many types, and we ordinary investors need to master the more important ones. So what are valuation indicators? Index valuation is also meaningful for investing in index funds and stocks. Let's learn about it together.
Valuation indicators are indicators to measure the intrinsic value of stocks. These indicators can help us quickly judge the relationship between stock prices and their intrinsic values.
For example, if we go to the bank to manage money and invest for 12 months, the expected return rate is 4.5%, that is, the interest rate of return, which is a valuation indicator. However, the interest rate of return is the valuation index of wealth management products, but for stock assets such as index funds, the valuation index is more abundant and complex.
What are the commonly used valuation indicators for stock index funds? There are more than 20 valuation indicators commonly used to evaluate stock assets. Generally, it is calculated by financial data of listed companies, such as earnings, net assets, sales, income, cash flow, dividends, etc. However, we don't need to understand everything, we just need to master the more important ones.
The most basic three valuation indicators:
1. P/E ratio: By using the most important data of listed companies - profit, the biggest value for listed companies is to make money for shareholders. How much money they earn is calculated by profit, so the P/E ratio is also the most important valuation indicator.
2. P/B ratio: It is a valuation index calculated based on the net assets of listed companies.
3. Dividend yield: A valuation index based on cash dividends of listed companies.
The above three valuation indicators are the most important three valuation indicators for index funds and stocks, but in addition to the above three important valuation indicators, there are two more important indicators:
Profit rate: It is based on the evolution of P/E ratio and is closely related to P/E ratio.
PEG： It is based on the P/E ratio and the profit growth rate of listed companies.
For common index funds, we ordinary investors only need to master the above five common valuation indicators. The specific use of the above five valuation indicators will be introduced in detail in the future.
