Investment Valuation Ratios compare the current stock price to various per-share performance indicators such as earnings, dividends, sales and cash flow of exploitation to help investors evaluate whether the stock is overvalued, fairly valued or undervalued. as an investment opportunity. Income, value, and growth investors have different investment objectives and therefore may have different views on a stock's value versus its price. The relationship between a company's stock price and its per share metrics is also called a multiple. A multiple can be looked at on an absolute basis and used to highlight historical trends, but it is more meaningful relative to competitors and the overall market. As with most ratios, investment value ratios can have many variations and an investment decision should not be made based on just one ratio. [sidebar] Data per share. Any item in a company's financial statements can be calculated on a per share basis. For balance sheet items (such as debt or book value per share), the denominator is the number of shares outstanding at the end of the period. For income, expense and cash flow items, the denominator is the weighted average number of shares outstanding during the period. Basic and diluted. Companies with outstanding stock options and other convertible securities report diluted earnings per share in addition to basic earnings per share. This treatment recognizes the potential dilution (an increase in the number of shares outstanding) that would occur if all convertible securities were immediately converted into common stock.Discontinued operations. When companies sell or discontinue a component of their business, earnings per share (basic and diluted) will be reported with an additional qualification: earn...... middle of paper ......the last dividend declared is annualized (multiplied by four for a quarterly dividend, or multiplied by 12 for a monthly dividend) and compared to the current stock price to generate the expected annual return. For a growth investor, dividend yield (or lack thereof) may not matter. However, for an income investor, a stock's dividend yield and its dividend growth rate may well be the only valuation metrics that matter. Investors use valuation ratios to determine a company's investment merit and to find a good entry or exit point into the market. Investor relations professionals should be familiar with basic investment valuation ratios as well as relevant industry or sub-sector benchmarks and variations. Since stock market valuation depends on investor sentiment, it's important to understand not only where your company ranks relative to its peers, but also why..