Cheat sheet

Key valuation ratios, one page

Every ratio is a shortcut, and every shortcut has a failure mode. Here are the seven you will actually meet, with the sentence and the trap for each.

Ratio	In one sentence	The trap
P/E (trailing)	Price divided by the last year's earnings per share: how many years of current profit you are paying upfront.	Meaningless when earnings are at a cyclical peak (looks cheap) or trough (looks dear), and unusable when negative. Always ask which year of earnings you are dividing by.
Forward P/E	Price against next year's expected earnings: what you pay if the analysts are right.	The word expected. Forecasts cluster, lag and flatter; a forward P/E is a promise someone else made on the company's behalf.
PEG	P/E divided by expected growth: roughly, what you pay per unit of growth. Around 1 is the folk benchmark for fairly priced growth.	Doubly exposed to the growth estimate. High-PEG quality compounders have embarrassed the metric for decades; use it to frame, not decide.
EV/EBITDA	Whole-company value (equity plus debt minus cash) against raw operating earnings: the ratio that cannot be fooled by financing choices.	EBITDA ignores the real cost of the equipment a business must keep buying. Fine for asset-light software, flattering for airlines and factories.
P/B	Price against accounting net worth: what you pay per pound of book value. At home with banks and insurers.	Book value barely describes modern asset-light businesses; brands and code sit off the balance sheet. A low P/B can simply mean the assets earn nothing.
Dividend yield	Cash paid to you per year as a percentage of the price.	Yield rises mechanically when the price collapses; the fattest yields are often the market pricing a cut. Check the payout against free cash flow, not earnings.
FCF yield	Free cash flow against price: the cash the business actually generates for owners, per pound invested. The quiet professional's favourite.	Lumpy capex years distort it in both directions; average several years before believing it.

One rule ties them together: a ratio is a question, not an answer. Cheap asks why; expensive asks what has to go right. SteadyShares shows each of these per stock with the sector context beside it.

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Educational information, not financial advice. Figures current as of July 2026 where dated; allowances and rates change, so check the source before acting.