As any long-suffering readers would know, I sporadically look at the key ratios (there are a lot around) you see most commonly cited in investment articles. Previously, I have investigated Price to Earnings parts 1 and 2, Earnings Yield, and EBIT to Enterprise Value; today it is the turn of another ratio that sounds about as appetising as a spoonful of […]

I didn’t even know that this was a ratio, until I read about it over the weekend, but it makes sense and looks useful, and so I am immediately promoting it to key ratio status. If you are wondering what the justification for the Mickey Mouse picture is, well, it is more to do with the magic than […]

Would you buy it? I recently read a comment attributed to Joel Greenblatt (although I can’t find the exact quotation anywhere) suggesting that the most sensible way to value a house is by using its rental yield. If  you do this, by considering rental income as the property’s equivalent of a share’s earnings, then I think you should be able to […]

A few weeks ago, I looked at P/E ratios but, as with the baseball bat, a P/E ratio has a surreptitious and more powerful use for which it was probably not intended–inverting it gives you the share’s earnings yield. This earnings yield can, in turn, be directly compared with other investments, such as government bond yields. When I first started […]

In the last year of his life, Ben Graham gave an interview to a trade journal–Medical Economics–in which he outlined a very simple quantitative method for selecting stocks. In fact, the method was simple to the point of simplistic and quite provocative in its total disregard for growth prospects. Graham, in his crustier years, seemed to […]

In my last post I had a look at the basic P/E ratio, but there are a couple of variations and an anomaly that are also worth being aware of. Forward price/earnings ratio It is not unusual to hear market experts talking loosely about forward price/earnings ratios. I think that these should come with a handful of salt. What […]

Reading about JP Morgan and trying to think about its tangible book value was a murky old business, and it made me think that it might be worthwhile to go back to the beginning and revise what I know about the basics of investing, before returning to the JPM annual report better prepared. The P/E ratio (price/earnings) is […]

In an earlier post (Intrinsic value and a formula) I had a look at a formula proposed by Ben Graham to simplify the mathematical models that were popular at the time. Subsequently, however, after interest rates took off in the 1970s, he returned to this formula and attempted to factor these into the calculation. The […]