Calculation: annual dividends per share divided by current price per share
Explanation: indicates how much dividends a company pays out per share, based on its current share price
Interpretation: the higher, the better, i.e. the earlier your initial investment is recouped

Indicates if the dividend yield has been increasing over the past 5 years

Calculation: total dividends divided by net income
Explanation: total dividends paid out to shareholders relative to the company’s total income
Interpretation: the closer to one but not exceeding one, the better; this ensures the company pays out a decent amount to its shareholders but simultaneously retains money to reserve

Calculation: [square root of (22.5 multiplied with EPS multiplied with book value per share)] divided by the current stock price
Explanation: the Graham number itself indicates the upper boundary of a price range for a stock that a rather conservative investor should be willing to pay; the overall indicator tells you if the stock is undervalued or not
Interpretation: the lower, the better, i.e. any value below one indicates an undervalue stock

Calculation: total debt divided by total equity
Explanation: what share of a company’s equity is financed by debt
Interpretation: a value below one indicates that the company has more equity than debt and could possibly pay back all of its debt at once with its equity

Calculation: there are different calculation techniques; most common to calculate FCF to Equity (FCFE) is cash from operations minus capital expenditures + net debt issued
Explanation: how much cash is left within the company after paying for operating, investing, and financing activities, i.e. how much cash is available to pursue shareholder value enhancing activities, such as new product development, dividend payouts, M&A activities, etc.
Interpretation: generally, the higher the better

Indicates if the FCF has been increasing over the past 5 years

Calculation: net income minus dividends, divided by the average number of outstanding shares
Explanation: how much a shareholder would get if the company would pay out all of its profit
Interpretation: the higher, the better

Average EPS over the past 3/ 5/ 10 years

Average revenue over the past 3 years

Indicates if the average net income over the past 3 years has been positive or not

Average net income over the past 3 years

Indicates if the average net income over the past 3 years has been positive or not

Calculation: market price per share divided by earnings per share (EPS)
Explanation: what an investor is willing to pay for one dollar of a company’s earnings, often referred to as the price multiple
Interpretation: the lower the better; a low P/E ratio indicates an undervalued stock

Calculation: market price per share divided by the book value per share (book value per share = (total assets – total liabilities) / total number of shares outstanding)
Explanation: what an investor is willing to pay for one dollar of a company’s assets, i.e. what value the market attaches to the company’s assets compared to their actual book value
Interpretation: the lower the better; a low P/B ratio indicates an undervalued stock

Calculation: P/E ratio divided by earnings growth rate
Explanation: a company’s price multiple simultaneously taking into account its earnings growth
Interpretation: the lower the better (i.e. ideally below one), indicating an undervalue stock

Calculation: net income divided by shareholders’ equity
Explanation: measures the firm’s profitability, i.e. how much the firm is earning in relation to its shareholders’ investments
Interpretation: the higher the better, i.e. the more return is generated for every shareholder’s investment

Calculation: current assets minus current liabilities
Explanation: liquidity metric that measures the firm’s efficiency, cash management ability, and short-term financial health
Interpretation: strongly depending on the industry; usually the higher the healthier, however, sometimes a negative working capital can also make sense

Calculation: current assets divided by current liabilities
Explanation: liquidity metric that indicates if a firm has enough current assets to pay for its current liabilities
Interpretation: the higher, the better; a value above one indicates the company has enough current assets to fully pay back its current liabilities

Calculation: net income divided by total assets
Explanation: indicates the firm’s profitability, i.e. how much the firm is earning in relation to its total assets
Interpretation: the higher, the better

Note: interpretations are only indicative and from a holistic, value-driven point of view; they should always be questioned and might vary depending on overall macroeconomic conditions or on the company’s level of maturity or industry