Study guide
5.5 Fundamental Equity Metrics & Ratios
Canadian Securities Course CSC
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1 Introduction & Exam Overview
About the CSC Exams
2 Chapter 1: The Canadian Investment Marketplace
1.1 The Canadian Securities Industry & the Investment Dealer's Role 1.2 Financial Intermediaries: Banks, Trusts, Credit Unions, Insurers & Pension Funds 1.3 Financial Market Trends 1.4 Investment Capital, Financial Instruments & Financial Markets 1.5 Canadian Exchanges, ATSs, Dark Pools & the Order Protection Rule 1.6 Canadian Securities Regulators, the CSA & CIRO 1.7 Investor Protection: OSFI, CIPF and CDIC 1.8 Ethics, Standards of Conduct & the Client Focused Reforms 1.9 Conflicts of Interest, Complaint Handling & Remediation
3 Chapter 2: The Economy
2.1 Economics Foundations & Measuring Economic Growth 2.2 The Business Cycle & Economic Indicators 2.3 Inflation & Interest Rates 2.4 The Labour Market & Unemployment 2.5 The Bank of Canada & the Inflation-Control Target 2.6 Implementing Monetary Policy: The Operating Band, Market Operations & Transmission 2.7 Fiscal Policy, Deficits & the Challenges of Government Policy 2.8 International Finance & Trade: The Balance of Payments and the Canadian Dollar
4 Chapter 3: Features and Types of Fixed-Income Securities
3.1 The Fixed-Income Marketplace, Bond Terminology & Security 3.2 Protective Covenants, Retirement Provisions & Extendible/Retractable Features 3.3 Government of Canada Securities: T-Bills, Marketable Bonds & RRBs 3.4 Provincial & Municipal Debt and Strip Bonds 3.5 Corporate Bonds, Credit Spreads & Bond Ratings 3.6 Money Market Instruments, Floating-Rate Notes & International Bonds 3.7 Other Fixed-Income Securities & Reading Bond Quotes
5 Chapter 4: Pricing and Trading of Fixed-Income Securities
4.1 Bond Pricing, Price–Yield Relationships & Accrued Interest 4.2 Yield Calculations & Return Measures 4.3 The Term Structure of Interest Rates & Yield Curve Theories 4.4 Fundamental Bond Pricing Properties: Volatility Rules, Duration & Convexity 4.5 Bond Market Trading & Bond Indexes
6 Chapter 5: Common and Preferred Shares
5.1 Common Shares: Ownership Rights, Voting & Restricted Shares 5.2 Dividends, DRIPs, Stock Splits & Consolidations 5.3 Preferred Shares: Features, Cumulative Dividends & Taxation 5.4 Preferred Share Variations: Convertible, Callable, Retractable, Floating & Rate-Reset 5.5 Fundamental Equity Metrics & Ratios 5.6 Stock Indexes & Averages
7 Chapter 6: Equity Transactions
6.1 Order Types, Execution & Market Mechanics 6.2 Margin Trading: Long Accounts & Borrowing 6.3 Short Selling & Short-Margin Requirements 6.4 Trading & Settlement Procedures: T+1, CDS & Confirmations
8 Chapter 7: Derivatives
7.1 Derivatives: Role, Underlying Assets & Users 7.2 Options Fundamentals: Calls, Puts & Moneyness 7.3 Option Strategies & Risk Management 7.4 Forward & Futures Contracts 7.5 Rights & Warrants
9 Chapter 8: Corporations and their Financial Statements
8.1 Corporate Structures & Corporate Governance 8.2 The Annual Report, Accounting Standards & the Auditor's Report 8.3 The Balance Sheet & Income Statement 8.4 The Cash Flow Statement & Earnings Quality 8.5 Public Company Disclosure, Investor Rights, Take-Over Bids & Insider Trading
10 Chapter 9: Financing and Listing Securities
9.1 Government & Corporate Financing: Underwriting and Syndicates 9.2 The Prospectus Process, Stabilization & Purchaser Rights 9.3 The Exempt Market & Private Placements 9.4 The Listing Process: TSX, TSXV & Capital Pool Companies 9.5 Continuous Disclosure, Material Changes & Insider Reporting
11 Chapter 10: Investment Analysis
10.1 Methods of Equity Analysis & Macroeconomic Analysis 10.2 Fundamental Industry Analysis 10.3 Company Analysis: Competitive Advantages, Governance & the Dividend Discount Model 10.4 Discounted Cash Flow & Relative Valuation Multiples 10.5 Financial Statement Ratio Analysis 10.6 Assessing Preferred Share Investment Quality 10.7 Technical Analysis: Charts, Trends & Patterns 10.8 Technical Indicators, Volume, Breadth & Sentiment
12 Chapter 11: Portfolio Analysis
11.1 Measuring Investment Return 11.2 Measuring Risk: Types of Risk, Standard Deviation & Downside Measures 11.3 Portfolio Risk & Return: Correlation and Diversification 11.4 Beta, the Capital Asset Pricing Model & the Security Market Line 11.5 Portfolio Manager Styles: Equity & Fixed Income 11.6 The Portfolio Management Process: Objectives, Constraints & the IPS 11.7 Asset Mix, Monitoring, Performance Evaluation & Rebalancing
13 Chapter 12: Alternative Investments, Other Managed, and Structured Products
12.1 Alternative Investments: Structures, Fees & Liquid Alternatives 12.2 Alternative Strategies, Performance Measurement & Due Diligence 12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity 12.4 Income Trusts, REITs & Closed-End Funds 12.5 Structured Products: PPNs & Market-Linked GICs 12.6 Split Shares & Asset-Backed Securities
14 Chapter 13: Mutual Funds
13.1 Managed Products & Mutual Fund Structure 13.2 Pricing Mutual Fund Units: NAVPS & Forward Pricing 13.3 Mutual Fund Fees, Sales Charges & Unit Series 13.4 Mutual Fund Regulation, Fund Facts & Account Opening 13.5 Types of Mutual Funds & Fund Management Styles 13.6 Redemptions, Withdrawal Plans & Measuring Fund Performance
15 Chapter 14: Exchange-Traded Funds (ETFs)
14.1 ETF Origins, Structure, Tax Efficiency & ETF Facts 14.2 ETF Creation, Redemption & Arbitrage 14.3 Types of ETFs & Advanced Strategies 14.4 Comparing ETFs, Mutual Funds & Individual Securities
16 Chapter 15: Working with the Institutional Client
15.1 The Institutional Marketplace & Institutional Clients 15.2 Institutional Investment Guidelines, Styles & Restrictions 15.3 Buy Side & Sell Side: Trading Desks, Revenue, Clearing & Best Execution 15.4 Block Trading, Dark Pools & Algorithmic Trading
17 Chapter 16: Fee-Based Accounts and Working with the Retail Client
16.1 Fee-Based Accounts: Managed & Non-Managed Models 16.2 Fee Transparency, CRM2 & Total Cost Reporting, and MWRR vs. TWRR 16.3 The Financial Planning Approach & the Life Cycle 16.4 Behavioral Finance, Sequence-of-Returns Risk & Client Coaching 16.5 Estate Planning Basics
18 Chapter 17: Canadian Taxation
17.1 The Canadian Taxation System 17.2 Taxation of Investment Income 17.3 Capital Gains, Losses & The Superficial Loss Rule 17.4 Registered vs Non-Registered Tax-Advantaged Accounts 17.5 Tax Planning Strategies, Pension Plans & the RDSP
5.5 Fundamental Equity Metrics & Ratios
Key Takeaways Explain This Topic AI
Basic EPS measures net income available to common shares divided by weighted average common shares, while Diluted EPS incorporates the potential conversion of all dilutive securities.
The Price-to-Earnings (P/E) ratio gauges market valuation per dollar of earnings; cyclical companies require caution due to peak-cycle earnings producing deceptively low P/E multiples.
Dividend Yield reflects annual cash flow return relative to market price, whereas the Dividend Payout Ratio measures the percentage of earnings distributed to shareholders.
Book Value Per Share (BVPS) reflects common equity net asset value per share; the Price-to-Book (P/B) ratio is essential for evaluating capital-intensive and financial institutions.
A dividend payout ratio consistently exceeding 100% indicates that distributions are not covered by current earnings, signaling acute dividend cut vulnerability.
Last updated: October 2026
Core Valuation Ratios and Financial Metrics in Equity Analysis
Fundamental equity analysis seeks to assess the financial health, operating profitability, and intrinsic valuation of a corporation. To compare companies across diverse sectors and market capitalizations, Canadian financial analysts rely on standardized per-share metrics and valuation multiples. Mastery of these formulas, their accounting inputs, and their analytical interpretations is crucial for securities professionals.
1. Earnings Per Share (EPS): Basic vs. Diluted
Earnings Per Share (EPS) is the most widely cited profitability metric in equity markets. It measures the net dollar profit earned by the corporation on behalf of each outstanding common share.
Basic Earnings Per Share
Basic EPS reflects current historical operating profitability based strictly on the actual weighted average number of common shares outstanding during the accounting period.
Basic EPS = Net Income − Preferred Dividends Weighted Average Number of Common Shares Outstanding \text{Basic EPS} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Average Number of Common Shares Outstanding}} Basic EPS = Weighted Average Number of Common Shares Outstanding Net Income − Preferred Dividends
Deduction of Preferred Dividends: Because preferred shareholders hold a prior claim to corporate profits, their dividends must be subtracted from net income to determine the residual earnings available to common shareholders. If the preferred shares are cumulative, the preferred dividend must be deducted regardless of whether it was formally declared; if non-cumulative, it is deducted only if declared.
Weighted Average Shares: Rather than using ending share counts, corporations calculate the time-weighted average of shares outstanding to account for share issuances, repurchases, or employee exercises throughout the fiscal year.
Diluted Earnings Per Share
Public corporations often issue complex securities that can be converted into or exchanged for common shares—such as convertible debentures, convertible preferred shares, executive stock options, and warrants. If these securities are exercised or converted, the total number of common shares outstanding increases, diluting existing shareholders' earnings per share.
Diluted EPS = Net Income − Preferred Dividends + After-Tax Convertible Adjustments Weighted Average Shares + Incremental Common Shares from Conversion \text{Diluted EPS} = \frac{\text{Net Income} - \text{Preferred Dividends} + \text{After-Tax Convertible Adjustments}}{\text{Weighted Average Shares} + \text{Incremental Common Shares from Conversion}} Diluted EPS = Weighted Average Shares + Incremental Common Shares from Conversion Net Income − Preferred Dividends + After-Tax Convertible Adjustments
The If-Converted Method: Assumes convertible debentures or convertible preferred shares were converted at the beginning of the period. For convertible debentures, the after-tax interest expense saved by eliminating the debt is added back to the numerator, and the new common shares are added to the denominator.
The Treasury Stock Method: Assumes cash proceeds received from in-the-money options and warrants are used by the firm to buy back common shares in the open market at the average market price, with the net incremental shares added to the denominator.
Regulatory Disclosure: Under IFRS (IAS 33 Earnings per Share ), Canadian public issuers must present both Basic EPS and Diluted EPS on the face of the statement of comprehensive income. Private companies using ASPE are not required to report EPS.
2. The Price-to-Earnings (P/E) Ratio
The Price-to-Earnings (P/E) ratio (or earnings multiple) indicates how much investors are willing to pay for each dollar of current or projected corporate earnings.
P/E Ratio = Current Market Price per Share Earnings Per Share (EPS) \text{P/E Ratio} = \frac{\text{Current Market Price per Share}}{\text{Earnings Per Share (EPS)}} P/E Ratio = Earnings Per Share (EPS) Current Market Price per Share
Trailing P/E vs. Forward P/E
Trailing P/E (Historical Multiple): Calculated using the company's actual reported EPS over the preceding 12 months (trailing four quarters). While grounded in audited historical facts, it suffers from a backward-looking orientation.
Forward P/E (Leading Multiple): Calculated using consensus analyst EPS estimates for the upcoming 12 months or next fiscal year. While forward-looking, it is vulnerable to forecasting errors and management guidance biases.
Analytical Interpretation Across Canadian Sectors
High P/E Multiples (e.g., 25x to 50x+): Reflect strong market optimism. Common in high-growth technology, biotechnology, and renewable energy sectors. Investors anticipate accelerated future earnings expansion and superior competitive moats.
Moderate P/E Multiples (e.g., 10x to 16x): Characteristic of mature, capital-intensive Canadian blue-chip corporations, such as the Big Six chartered banks, pipeline operators, and regulated electric utilities.
Low P/E Multiples (e.g., 4x to 8x): May indicate market skepticism, structural industry decline, or an impending corporate turnaround. However, in cyclical sectors, low P/Es carry a unique trap.
Exam Focus: The Cyclical P/E Trap: In cyclical Canadian industries (base metal mining, oil sands extraction, lumber production), corporate earnings hit extreme peaks at the top of a commodity cycle. This creates a deceptively low trailing P/E multiple (e.g., $60.00 stock / $12.00 peak EPS = 5.0x). Inexperienced investors view this as an undervalued bargain. In reality, peak earnings are about to collapse as commodity prices normalize, making a low P/E at the top of a cycle a dangerous "value trap." Conversely, at the cyclical trough, depressed earnings cause P/E ratios to appear abnormally high or negative.
3. Dividend Yield and Dividend Payout Ratio
Income-oriented investors evaluate two complementary metrics when assessing dividend safety and cash return:
Dividend Yield
The Dividend Yield measures the annual cash return generated by the dividend relative to the current market price of the common share.
Dividend Yield = Annual Dividend per Share Current Market Price per Share × 100 % \text{Dividend Yield} = \frac{\text{Annual Dividend per Share}}{\text{Current Market Price per Share}} \times 100\% Dividend Yield = Current Market Price per Share Annual Dividend per Share × 100%
Indicated Dividend Yield: Calculated by taking the most recent quarterly dividend, annualizing it (multiplying by 4), and dividing by the current market price.
Inverse Relationship: Because the market price is in the denominator, a decline in stock price causes the dividend yield to rise, and vice versa (assuming the dividend payment remains constant).
Dividend Payout Ratio
The Dividend Payout Ratio measures the percentage of corporate net earnings distributed to shareholders in the form of cash dividends.
Dividend Payout Ratio = Annual Dividend per Share Earnings Per Share (EPS) × 100 % = Total Common Dividends Paid Net Income Available to Common Equity × 100 % \text{Dividend Payout Ratio} = \frac{\text{Annual Dividend per Share}}{\text{Earnings Per Share (EPS)}} \times 100\% = \frac{\text{Total Common Dividends Paid}}{\text{Net Income Available to Common Equity}} \times 100\% Dividend Payout Ratio = Earnings Per Share (EPS) Annual Dividend per Share × 100% = Net Income Available to Common Equity Total Common Dividends Paid × 100%
The Retention Ratio
The portion of net earnings that is not paid out in dividends is retained by the corporation to reinvest in capital projects, research, debt repayment, or acquisitions. This is termed the retention ratio :
Retention Ratio = 1 − Dividend Payout Ratio = EPS − DPS EPS \text{Retention Ratio} = 1 - \text{Dividend Payout Ratio} = \frac{\text{EPS} - \text{DPS}}{\text{EPS}} Retention Ratio = 1 − Dividend Payout Ratio = EPS EPS − DPS
Interpreting Dividend Payout Ratios
Regulated Utilities & Telecoms (60% to 80%): Because revenues are governed by regulated rate bases or long-term subscriber contracts, these mature firms can safely sustain high payout ratios.
High-Growth Firms (0% to 25%): Growth enterprises reinvest virtually 100% of operating cash flows back into the business to fund expansion, paying negligible or zero dividends.
Payout Ratios Exceeding 100% (Critical Warning Sign): When the payout ratio exceeds 100%, the company is distributing more cash to shareholders than it generates in net profit. The dividend is being financed by drawing down balance sheet cash, issuing corporate debt, or selling assets. This is an unsustainable condition that strongly signals an impending dividend reduction or cancellation .
4. Book Value Per Share (BVPS) and Price-to-Book (P/B) Ratio
Book value metrics evaluate equity value from a balance sheet accounting perspective rather than an income statement perspective.
Book Value Per Share (BVPS)
Book Value Per Share represents the net asset value belonging to common shareholders on a per-share basis if all assets were liquidated at their historical balance sheet carrying amounts and all debt claims were settled.
BVPS = Total Shareholders’ Equity − Preferred Equity Number of Common Shares Outstanding \text{BVPS} = \frac{\text{Total Shareholders' Equity} - \text{Preferred Equity}}{\text{Number of Common Shares Outstanding}} BVPS = Number of Common Shares Outstanding Total Shareholders’ Equity − Preferred Equity
Tangible Book Value Per Share
Because intangible assets (such as goodwill, trademarks, patents, and customer lists) cannot easily be liquidated in bankruptcy, conservative analysts calculate Tangible BVPS :
Tangible BVPS = Total Shareholders’ Equity − Preferred Equity − Intangible Assets Number of Common Shares Outstanding \text{Tangible BVPS} = \frac{\text{Total Shareholders' Equity} - \text{Preferred Equity} - \text{Intangible Assets}}{\text{Number of Common Shares Outstanding}} Tangible BVPS = Number of Common Shares Outstanding Total Shareholders’ Equity − Preferred Equity − Intangible Assets
The Price-to-Book (P/B) Ratio
The Price-to-Book (P/B) ratio compares the secondary market price of a common share to its accounting book value per share:
P/B Ratio = Current Market Price per Share Book Value Per Share (BVPS) \text{P/B Ratio} = \frac{\text{Current Market Price per Share}}{\text{Book Value Per Share (BVPS)}} P/B Ratio = Book Value Per Share (BVPS) Current Market Price per Share
Sector Applications and Limitations of P/B
Primary Utility: P/B ratios are highly effective for valuing financial institutions (Canadian chartered banks, lifecos) and capital-intensive asset-heavy businesses (utilities, real estate, natural resources). In these sectors, balance sheet assets are regularly marked close to market value and directly drive earnings capacity.
Limitations: P/B ratios are ineffective for service, technology, and consumer branding firms (e.g., enterprise software, pharmaceutical developers) where the primary economic engines—human talent, proprietary software code, brand loyalty—are not capitalized on historical accounting balance sheets.
P/B Below 1.0x: When a stock trades below book value, it may represent a deep-value opportunity where the market is pricing assets at a discount. However, it frequently indicates that the company is failing to earn its cost of capital or that massive asset write-downs and impairments are imminent.
Comprehensive Worked Case Study: Maple Leaf Logistics Inc.
To synthesize these valuation concepts, analyze the following financial profile for Maple Leaf Logistics Inc. , a TSX-listed supply chain corporation:
- Financial Statement Data
- Consolidated Net Income: $45,000,000
- Preferred Dividends Paid: $5,000,000
- Common Dividends Declared: $19,200,000
- Regular Quarterly Common Dividend: $0.48 per share
- Weighted Average Common Shares Outstanding: 10,000,000 shares
- Current Common Share Market Price: $48.00
- Total Balance Sheet Assets: $650,000,000
- Total Balance Sheet Liabilities: $330,000,000
- Total Shareholders' Equity: $320,000,000
- Preferred Share Equity: $70,000,000
- Intangible Assets (Goodwill & Software Patents): $30,000,000
- Step-by-Step Metric Derivations
- Step 1: Net Income Available to Common Shareholders
Net Income to Common = $ 45 , 000 , 000 − $ 5 , 000 , 000 = $ 40 , 000 , 000 \text{Net Income to Common} = \$45,000,000 - \$5,000,000 = \$40,000,000 Net Income to Common = $45 , 000 , 000 − $5 , 000 , 000 = $40 , 000 , 000
Step 2: Basic Earnings Per Share (EPS)
Basic EPS = $ 40 , 000 , 000 10 , 000 , 000 shares = $ 4.00 per share \text{Basic EPS} = \frac{\$40,000,000}{10,000,000\text{ shares}} = \$4.00\text{ per share} Basic EPS = 10 , 000 , 000 shares $40 , 000 , 000 = $4.00 per share
Step 3: Price-to-Earnings (P/E) Ratio
P/E Ratio = $ 48.00 $ 4.00 = 12.0 x \text{P/E Ratio} = \frac{\$48.00}{\$4.00} = 12.0\text{x} P/E Ratio = $4.00 $48.00 = 12.0 x Interpretation: Investors are currently paying $12.00 for every $1.00 of annual net profit.
Step 4: Indicated Annual Dividend and Dividend Yield
Indicated Annual Dividend = $ 0.48 × 4 = $ 1.92 per share \text{Indicated Annual Dividend} = \$0.48 \times 4 = \$1.92\text{ per share} Indicated Annual Dividend = $0.48 × 4 = $1.92 per share Dividend Yield = $ 1.92 $ 48.00 × 100 % = 4.00 % \text{Dividend Yield} = \frac{\$1.92}{\$48.00} \times 100\% = 4.00\% Dividend Yield = $48.00 $1.92 × 100% = 4.00%
Step 5: Dividend Payout Ratio and Retention Ratio
Dividend Payout Ratio = $ 1.92 $ 4.00 × 100 % = 48.00 % \text{Dividend Payout Ratio} = \frac{\$1.92}{\$4.00} \times 100\% = 48.00\% Dividend Payout Ratio = $4.00 $1.92 × 100% = 48.00% Retention Ratio = 100 % − 48.00 % = 52.00 % \text{Retention Ratio} = 100\% - 48.00\% = 52.00\% Retention Ratio = 100% − 48.00% = 52.00% Interpretation: The company pays out 48% of its net earnings to common shareholders and retains 52% to finance future fleet modernization and software investments.
Step 6: Common Equity and Book Value Per Share (BVPS)
Common Shareholders’ Equity = $ 320 , 000 , 000 − $ 70 , 000 , 000 = $ 250 , 000 , 000 \text{Common Shareholders' Equity} = \$320,000,000 - \$70,000,000 = \$250,000,000 Common Shareholders’ Equity = $320 , 000 , 000 − $70 , 000 , 000 = $250 , 000 , 000 BVPS = $ 250 , 000 , 000 10 , 000 , 000 shares = $ 25.00 per share \text{BVPS} = \frac{\$250,000,000}{10,000,000\text{ shares}} = \$25.00\text{ per share} BVPS = 10 , 000 , 000 shares $250 , 000 , 000 = $25.00 per share
Step 7: Price-to-Book (P/B) Ratio
P/B Ratio = $ 48.00 $ 25.00 = 1.92 x \text{P/B Ratio} = \frac{\$48.00}{\$25.00} = 1.92\text{x} P/B Ratio = $25.00 $48.00 = 1.92 x
Step 8: Tangible Book Value Per Share
Tangible Common Equity = $ 250 , 000 , 000 − $ 30 , 000 , 000 = $ 220 , 000 , 000 \text{Tangible Common Equity} = \$250,000,000 - \$30,000,000 = \$220,000,000 Tangible Common Equity = $250 , 000 , 000 − $30 , 000 , 000 = $220 , 000 , 000 Tangible BVPS = $ 220 , 000 , 000 10 , 000 , 000 shares = $ 22.00 per share \text{Tangible BVPS} = \frac{\$220,000,000}{10,000,000\text{ shares}} = \$22.00\text{ per share} Tangible BVPS = 10 , 000 , 000 shares $220 , 000 , 000 = $22.00 per share Price-to-Tangible Book = $ 48.00 $ 22.00 = 2.18 x \text{Price-to-Tangible Book} = \frac{\$48.00}{\$22.00} = 2.18\text{x} Price-to-Tangible Book = $22.00 $48.00 = 2.18 x
Summary of Equity Metrics and Formulas
Valuation Metric Standard Mathematical Formula Core Analytical Focus
Basic EPS Net Income − Preferred Dividends Weighted Average Common Shares \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Average Common Shares}} Weighted Average Common Shares Net Income − Preferred Dividends Net profit attributable to each individual common share
Diluted EPS Adjusted Net Income Weighted Average Shares + Dilutive Conversion Shares \frac{\text{Adjusted Net Income}}{\text{Weighted Average Shares} + \text{Dilutive Conversion Shares}} Weighted Average Shares + Dilutive Conversion Shares Adjusted Net Income Minimum potential profitability accounting for all convertible instruments
P/E Multiple Market Price per Share Earnings Per Share \frac{\text{Market Price per Share}}{\text{Earnings Per Share}} Earnings Per Share Market Price per Share Market price paid per dollar of earnings; relative valuation benchmark
Dividend Yield Annualized Dividend per Share Market Price per Share × 100 % \frac{\text{Annualized Dividend per Share}}{\text{Market Price per Share}} \times 100\% Market Price per Share Annualized Dividend per Share × 100% Cash flow yield generated relative to current secondary market price
Payout Ratio Annual Dividend per Share Earnings Per Share × 100 % \frac{\text{Annual Dividend per Share}}{\text{Earnings Per Share}} \times 100\% Earnings Per Share Annual Dividend per Share × 100% Proportion of earnings paid to shareholders; dividend sustainability indicator
Retention Ratio EPS − DPS EPS = 1 − Payout Ratio \frac{\text{EPS} - \text{DPS}}{\text{EPS}} = 1 - \text{Payout Ratio} EPS EPS − DPS = 1 − Payout Ratio Proportion of earnings retained internally to fund corporate expansion
BVPS Total Equity − Preferred Equity Common Shares Outstanding \frac{\text{Total Equity} - \text{Preferred Equity}}{\text{Common Shares Outstanding}} Common Shares Outstanding Total Equity − Preferred Equity Net asset value backing each common share from balance sheet records
P/B Multiple Market Price per Share Book Value Per Share \frac{\text{Market Price per Share}}{\text{Book Value Per Share}} Book Value Per Share Market Price per Share Premium or discount paid relative to net historical balance sheet capital