Calculators

Market cap tells you the size of a company in the market. Large-, mid- and small-cap describe size, not quality: each band has well-run and poorly-run companies.

EPS is a per-share view of profit. It rises when profit grows, and it falls if the company issues many new shares (dilution) faster than profit grows.

A P/E is not “cheap” or “expensive” on its own. To interpret one, investigate the company's growth, the industry it operates in, its history, and how much debt it carries. A high P/E often reflects expectations of future growth; a low P/E can reflect doubt, a slow-growing industry, or simply a temporary jump in earnings. Change the numbers above and notice how small changes in EPS move the ratio a lot.

Book value is an accounting figure — it reflects historical costs, not what the business could fetch today. Asset-light businesses (like software or services) often trade well above book value because their main assets never appear on the balance sheet. P/B tends to be more informative for asset-heavy businesses such as banks.

A high ROE is encouraging, but it should never be read in isolation. Debt can inflate ROE (less equity funds the same profit), and a shrinking equity base can do the same. Check how the ROE is being generated before drawing conclusions.

ROCE lets you compare businesses with different mixes of debt and equity, because it measures profit against all the capital used. A ROCE consistently above the cost of borrowing is one sign a business creates value as it grows.

Debt is not automatically bad — it can fund growth more cheaply than issuing shares. What matters is whether the business earns more on that capital than the interest it pays, and whether its cash flows can comfortably service the debt. Capital-intensive industries tend to carry more debt than asset-light ones.

Margins reveal the shape of a business. Compare a company's margins with its own past and with close competitors — margins differ enormously by industry, so cross-industry comparisons mislead.

CAGR smooths out the bumps to give a single average rate. It is a description of the past. A strong historical CAGR does not guarantee future growth — the conditions that produced it may change.

A very high yield can mean a generous company — or a share price that has fallen sharply. A low payout means more profit is retained to reinvest, which can be appropriate for a fast-growing business. Neither is inherently better; context decides.

Two companies with the same market cap but different debt loads are not equally priced. EV accounts for that, which is why it is useful when comparing companies with different capital structures.

Because EV/EBITDA sits above interest and tax, it lets you compare a heavily indebted company with a debt-free one. It still ignores capital expenditure, which can be large for capital-intensive businesses — so pair it with a look at cash flow.