128 - Key Investing Ratios: P/E, P/S, ROA, ROE, Gross Margin

Mental Models discussed in this podcast: Investing Ratios Break Points Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.  Follow me on Twitter and YouTube Twitter Handle: @TreyHenninger YouTube Channel: DIY Investing Support the Podcast on Patreon This is a podcast supported by listeners like you. If you'd like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron. Show Outline The full show notes for this episode are available at https://www.diyinvesting.org/Episode128 Key Investing Ratios P/E: Goal: Max: P/S Max: ROA: Goal: >10% Ideal: >15% ROE: Min: 10% Goal: >15% Ideal: >20% Gross Margin: Higher the better (>50%) Stability is more important than the absolute number Focus: Limits and Break Points Source: https://twitter.com/solvealways/status/1486992514196324354?s=20&t=xGDVCwWNDXmL9VM7hpQN2A   Summary: The important thing to remember about the key investing ratios is to understand that they are always relative. What you're looking for is understanding the limits you don't want to pass, and key break points that signify certain things about the business. Above all, stability is critical when evaluating a high quality business.