These simple numbers help you look under the hood of a business to assess its quality, value, and health.

Profitability & Quality (Is it a good business?):

• Return on Equity (ROE): Shows how efficiently a company uses investors’ money to make a profit. Consistently above 15-20% is a sign of a high-quality business.
• Earnings Per Share (EPS): The total profit divided by the number of shares. You want to see this number growing steadily over the years.

Valuation (Is the price fair?):

• Price-to-Earnings (P/E) Ratio: The share price divided by the EPS. It tells you how much investors are willing to pay for ₦1 of profit. You can compare a company’s P/E to its past average or to other companies in the same sector to see if it’s cheap or expensive.
• Price-to-Book (P/B) Ratio: Compares the company’s share price to its “net worth” on paper. This is very useful for banks and industrial companies.
• Dividend Yield: The annual dividend divided by the share price. This is the return you get in cash each year from dividends.

Financial Health (Is it safe?):

• Debt-to-Equity Ratio: Compares a company’s total debt to its net worth. A high number (e.g., over 1.0) can be a sign of risk.

How to Use Them Intelligently:

• Look for Trends: Is the ROE getting better each year? Is debt going down? A single number is a snapshot; the trend tells the story.

Context is King: A metric is meaningless on its own. Always compare it to the company’s own history and to its direct competitors.