1. Equity Market Metrics
Market ratios blend standard accounting figures from financial statements with real-time stock market data to evaluate how public investors price a firm’s financial performance.
 
2. Core Valuation Multiples
Price-to-Earnings (P/E) Ratio
Represents the amount investors are willing to pay for every dollar of current corporate earnings. It reflects the market’s expectation of future growth:

  • Earnings Per Share (EPS)

Price-to-Book (P/B) Ratio
Compares the market value of equity directly against its historical accounting net asset value:

  • P/B Ratio = Market Price Per Share / Book Value Per Share (BVPS)
    where BVPS = Total Stockholders’ Equity / Total Outstanding Shares


Where: BVPS = Total Stockholders’ Equity / Total Outstanding Shares.

Price-to-Sales (P/S) Ratio
Useful for valuing early-stage high-growth tech companies that are not yet net-profitable but possess massive revenue pipelines:

  • P/S Ratio = Market Price Per Share / Sales (Revenue) Per Share

 

  • 3. Enterprise Value Multiples
Equity multipliers can be distorted by variations in debt choices. To perform cleaner comparisons, corporate finance relies on Enterprise Value (EV) multiples. EV treats the firm as a whole, capturing the theoretical takeover cost of the entire business entity.

  • EV = Market Value of Common Equity + Market Value of Debt + Preferred Stock − Cash & Equivalents
  • EV/EBITDA = Enterprise Value / EBITDA
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