5 Financial Ratios That Separate a Good Company From a Good Investment

Simran

A strong brand and profits don’t guarantee good returns. Smart investors check ratios to avoid overpriced stocks.

PEG Ratio = P/E ÷ EPS growth. A PEG below 1 often signals a stock with strong growth at a reasonable price.

Return on Equity (ROE) shows profit from investor capital. ROE above 15–20% suggests efficient management.

Debt-to-Equity Ratio shows financial risk. A D/E under 1 means the company relies more on equity than debt.

Free Cash Flow Margin and Operating Margin reveal real earnings strength and pricing power in the business.

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