Stock analysis for beginners

The 5 most important ratios for valuing shares:

1. P/E ratio (price-earnings ratio, German: KGV):

Share price ÷ earnings per share. Below 15: cheap. Above 25: expensive. But: growth companies often have a high P/E.

2. Dividend yield:

Annual dividend ÷ share price × 100. Above 3%: good. Above 6%: careful (could point to problems).

3. Revenue growth:

How fast is revenue growing? Over 10%/year: growth company. Under 3%: mature company.

4. Profit margin:

Profit ÷ revenue × 100. Over 15%: profitable. Under 5%: price competition, thin margins.

5. Debt ratio:

Debt ÷ equity. Under 1: soundly financed. Over 2: highly indebted.

Honest recommendation: analysing individual shares is time-consuming and risky. For 90% of private investors, a broadly diversified ETF is the better choice. Share analysis is for people who do it as a hobby – not out of necessity.