Financial Ratio Analysis Software for Stock Investing
Stock Research Pro offers financial ratio analysis software as part of the new release of the SRP Valuation software package. The software was developed to help both new and seasoned stock investors to assess the financial health and strength of a company and arrive at the real or “intrinsic” value of its stock. As part of this evaluation process, the SRP Valuation software streamlines the data collection and automates the formulas associated with some of the primary financial ratios used when analyzing a stock for investment.
Software to Automate Financial Ratio Analysis
The SRP Valuation software includes six modules, one of which (the Ratio Analysis Module) directs the investor to the relevant financial statements to run the following financial ratios:
Current Ratio (liquidity): The current ratio is used to test the financial strength of a company by measuring the company’s ability to pay off its short-term debt obligations with its cash, inventory, and receivables. A high current ratio indicates and ability to meets these obligations; lower value can point to potential financial problems.
Debt to Equity (leverage): The debt to equity ratio is used to measure the levels of equity and debt the company is using to finance its assets. The measure offers an indication of the relationship between the capital contributed by company shareholders and that which was contributed by creditors. A high ratio demonstrates that the company is aggressively financing its growth through debt- a potential warning sign.
Return on Equity (profitability): Return on Equity (ROE) is used to measure company profitability by indicating the level of profit generated with the money invested by company shareholders. A company with a high ROE is generating surplus funds it can allocate toward expansion.
Asset Turnover (efficiency): The asset turnover ratio measures the relationship between a company’s assets and the revenues it generates. Asset turnover provides an indication of how efficiently the company leverages its assets. A high or improving asset turnover ratio is generally seen as favorable.
Dividend Yield (return): The dividend yield is used to measure what a company pays out in dividends on an annual basis relative to the price of its stock. Putting aside any capital gains, the dividend yield measures the return for a stock.
Price/ Earnings (valuation): The Price/Earnings (P/E) ratio measures the current share price of a stock compared to its earnings per share (EPS). The P/E ratio shows how much investors are willing to pay for each dollar of earnings a company generates. Very high P/E ratios indicate investor optimism in the future of that company; it can also mean the stock has become over-valued.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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