There are many ways to invest in stocks, depending on your goals and your investment profile. Whichever method you use, there is one thing you should always keep in mind: it is essential to analyze company information before making a decision. At the end of the day, if you already do it to buy a TV, a mobile phone or take a vacation, you should also do it when investing your money.

The number of indicators has been growing over time, but here are six fundamental indicators to invest in stocks that every investor should know.

1. Price Earnings Ratio or PER

This is one of the best-known and most used investment indicators to invest in stocks successfully. The key to successful investing is its simplicity. The Price Benefit Ratio indicates the number of times the benefit is contained in the share price. This way, you can find out how many years it will take to recover your initial investment if the company maintains its level of profits. For record purpose, the market average PER of the stock market currently ranges from 20-25. In this case, stocks with a PER below this range would be cheap or a good purchase option. While those with a higher PER would be expensive or overvalued.

2. Price/Book Value or P/BV

The Price/Book Value is another ratio used to determine the target price of a share. It is also an indicator of the strength of the company’s accounts, beyond its growth potential. Its operation is similar to that of the PER.

3. EV/EBITDA

The Ebitda is one of the critical company data that usually accompany the publication of a company’s results. It is the acronym for Profit before interest, taxes, depreciation, and amortization. Thus, it serves to offer an image closer to the real business of the company.

4. Cash flow multiplier or P/FCF

This indicator is also used to determine when a company is expensive or cheap. The cash flow multiplier is used to relate the cash flows generated by the company (that is, the movement of money through its business) with its price on the stock market.

5. Dividend yield

Dividends are the part of Profit that the company decides to distribute among the shareholders. So it’s something like an additional remuneration beyond the company’s revaluation on the stock market.

For example, if a company is trading at $20 and has paid out $2 in dividends in the year, its dividend yield will be 10%.

This indicator is interesting for those who invest in the long term and plan to reinvest those dividends.

6. Debt ratio

This is a financial ratio that has nothing to do with the share price but instead with the general strength of the company.

In principle, the lower this ratio, the less indebted the company will be and the less dependent on debt to grow.

In conclusion

Traders familiar with technical indicators are more likely to navigate the financial markets than those lacking this knowledge. So then, where can you get this knowledge? Knightsbridge Trading Academy is the answer. They offer one of the best online courses for anyone willing to invest in stocks. Their programs will help you learn to earn from the elite traders, CISI accredited tutors, brokers, and financial analysts in the industry, who have worked for some of the most prestigious financial institutions in the world.