Understanding Valuation Ratios

Following LEI Lesson 11, use the Key Valuation Ratios section of FINRA’s Evaluating Stocks to reinforce how investors use financial ratios to compare companies. Review EPS and P/E, emphasizing that the P/E ratio indicates how much investors are paying for each dollar of a company’s earnings. Briefly introduce P/S and D/E as additional measures investors may use. Emphasize that ratios should not be interpreted in isolation; comparisons with similar companies, the company’s industry, and the broader market provide important context