While the importance of metrics can vary depending on the industry and specific circumstances, the following ten metrics are generally considered indispensable by financial analysts:
1. Revenue: This metric indicates the total amount of money generated by a company’s operations and is crucial for evaluating growth and profitability.
2. Net Income: Representing the company’s bottom line, net income (profit after tax) reveals the company’s overall financial performance and profitability.
3. Gross Margin: Calculated by subtracting the cost of goods sold (COGS) from revenue and dividing it by revenue, gross margin helps assess the company’s ability to control production costs.
4. Return on Equity (ROE): ROE indicates the profitability of shareholder investments. It is calculated by dividing net income by shareholder equity and is used to measure a company’s efficiency in generating profits.
5. Earnings per Share (EPS): EPS reveals the portion of earnings allocated to each outstanding share. This metric is crucial for shareholders as it helps assess the potential return on their investment.
6. Debt-to-Equity Ratio: The debt-to-equity ratio compares a company’s total debt to its total equity and is used to evaluate a company’s financial leverage and solvency.
7. Operating Cash Flow (OCF): OCF represents the cash generated from a company’s core operations and helps analysts assess the company’s ability to generate sustainable cash flows.
8. Current Ratio: Calculated by dividing a company’s current assets by its current liabilities, the current ratio measures a company’s short-term liquidity and the ability to meet its obligations.
9. Return on Assets (ROA): ROA evaluates how efficiently a company utilizes its assets to generate profits, indicating management’s effectiveness in utilizing company resources.
10. Price-to-Earnings (P/E) Ratio: The P/E ratio compares a company’s stock price to its earnings per share, providing insights into the market’s expectations of the company’s future earnings growth.
These ten metrics provide a comprehensive view of a company’s financial health, enabling financial analysts to evaluate performance, profitability, liquidity, and efficiency.
