## Six fundamental Parameters to shortlist a wonderful company!

**Earning per share (EPS):**

**Earnings per share** (**EPS**) is the basic fundamental portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.

*EPS = Net Earnings / Outstanding Shares*

**Net sales:**

The sales number reported on a company’s financial statements is a **net sales number**, reflecting these deductions. Because deductions from the gross sales are represented in the net sales figure, **net sales** gives a more accurate picture of the actual sales generated by the company or the money that it expects to receive.

**Book value per share (BVPS):**

Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.Should the company decide to dissolve, the book value per common indicates the rupee value remaining for common shareholders after all assets are liquidated and all debtors are paid.In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.

**Return on invested capital (ROIC):**

A calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments. Return on invested capital gives a sense of how well a company is using its money to generate returns. Comparing a company’s return on capital (ROIC) with its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively.

**Debt to Equity ratio should be less than 1:**

Debt/Equity Ratio is a debt ratio used to measure a company’s financial leverage. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders’ equity.

The formula for calculating D/E ratios can be represented in the following way:

*Debt to Equity Ratio = Total Liabilities / Shareholders’ Equity*

The result may often be expressed as a number or as a percentage.

(Debt to equity ratio ratio differ for one industry to another industry)

**Price to Earning ratio (P/E):**

P/E ratio is used to determine how much investors are willing to pay for a stock to the company’s earning

We should compare P/E ratio with Other companies of the same industry and then decide to buy. It is simple how much money a investor is willing to pay for each rupee a company is going to earn in future.

Following were the top six fundamental parameters used by investor for selecting the right stocks for long term investments, want to learn more on Fundamental analysis, following are the top books on fundamental analysis:

- The Intelligent Investor Paperback –

# Indian Economy Paperback –

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