How do you value a stock portfolio

If you want to assess stocks, you have to look carefully and keep an eye on several sizes. Investors can find the most important key figures in the course section of daily newspapers or on various portals on the Internet, for example here and here. What indicators such as P / E ratio, P / E ratio and cash flow mean.

The price-earnings ratio (P / E)

Which stock is particularly cheap? And which one is currently overrated? One of the most common metrics to find out is the price-earnings ratio (P / E). This value is obtained by dividing the price by the net profit per share.

Suppose the market value of a share is 25 euros and the company makes a profit of two euros per share. This results in a price / earnings ratio of 12.5. With regard to the company as a whole, the indicator shows the multiple of the annual profit with which it is valued on the stock exchange. In other words, the P / E ratio tells you how many years it would take for the company to make the value of its shares in profit.

Basically, the lower the PER, the better. But be careful: companies can easily cheat when specifying profit. Make sure that interest, taxes and depreciation have been deducted for the net profit, i.e. no EBIT or Earnings Before Interest and Taxes formed the basis of the calculation. Also important: Was the profit of the previous year used for the calculation or the expected profit for the current one? Data for the past fiscal year is backed up, but also out of date. The profit in the current financial year is more meaningful. However, this is only a vague estimate at an early stage. If the stock market is doing well, the analysts' profit expectations are often exaggerated. A look at the company's recent history can be helpful. Have the past few years been profitable? Don't let a single outlier blind you to the top.

The price / earnings ratios differ significantly from industry to industry. Only comparisons with direct competitors are useful: How highly are they rated? What is the profit outlook for the entire industry? Are any ongoing processes or threatened lawsuits affecting a company's profit prospects?

The KGV is given in many newspapers in the course part - also in the Süddeutsche Zeitung. In the Anglo-Saxon world it is called the Price-Earnings-Ratio (PER).