Evaluate stocks – systematically instead of gut feeling
Anyone who wants to buy or evaluate stocks often faces the question: Is it really worth it? The solution: Don't rely on tips from the internet, but on hard facts and figures.
12 key figures simply explained
These 12 metrics allow you to evaluate stocks objectively, transparently, and easily understood even for beginners. Each metric is assigned a value of +1, 0, or -1 point. The result is an overall picture: The more positive points, the more attractive the stock.
Before you buy a stock, you should analyze it based on clear facts, not just gut feeling. This scoring system allows you to evaluate stocks – step by step and without any prior knowledge.
Our evaluation method
Our method combines proven strategies from leading stock market experts with her own experience and practical development. She was inspired by well-known works of financial literature, including The Intelligent Investor by Benjamin Graham and The relaxed path to wealth by Susan Levermann.
On this basis, we have a independent rating system It was specially developed for daily, fully automated analysis of shares and is consistently focused on the digital use To continuously improve the validity of the evaluations, the system checked regularly and specifically optimized.
In recent years, we have further developed our valuation methodology several times to improve the quality of our analyses and the returns achieved. The most significant optimization to date was implemented in November 2025. This involved, in particular, revising the valuation of technology stocks and adapting them to their specific characteristics. You can find more details here..
The result is a transparent, data-based stock valuationIt supports informed decisions and promotes long-term investment success.
The 12 key figures at a glance
1. Return on equity
Definition:
Return on equity measures how efficiently a company uses its equity. It's about how much profit the company generates relative to its equity.
Significance for the evaluation:
A high return on equity shows that a company is using its capital well. The company generates more profit with less money—a sign of economic strength.
Calculation:
Return on equity = (Net income / Equity) × 100
Evaluation:
- +1 point: > 15 %
- 0 points: 10–15 %
- –1 point: < 10 %
2. Equity ratio
Definition:
The equity ratio shows the proportion of equity to the total capital (equity + debt) of the company.
Significance for the evaluation:
The higher the equity ratio, the more solid the company's financial position. A high equity ratio reduces the risk of insolvency and, conversely, means lower debt.
Calculation:
Equity ratio = (equity / total capital) × 100
Evaluation:
- +1 point: > 25 %
- 0 points: 15–25 %
- -1 point: < 15 %
Industry-specific evaluation
The equity ratio is assessed differently depending on the industry, as business models require different capital structures.
Technology companies typically have higher equity ratios, while financial companies (e.g., banks, insurance companies, real estate companies, financial service providers) deliberately operate with lower equity ratios.
Therefore, adjusted thresholds are used for these industries:
Technology companies
+1 point: Equity ratio > 45%
0 points: Equity ratio between 30% and 45%
-1 point: Equity ratio < 30%
financial companies
+1 point: Equity ratio > 10%
0 points: Equity ratio between 5% and 10%
-1 point: Equity ratio < 5%
3. Profit margin (EBIT margin)
Definition:
The profit margin (EBIT – Earnings Before Interests and Taxes) measures the profit before taxes and interest in relation to sales.
Significance for the evaluation:
A high profit margin indicates that a company operates efficiently and can generate high profits from its revenues. However, this metric is not meaningful for financial companies (e.g., banks, insurance companies, real estate firms, financial service providers) and is therefore not evaluated, as their business models rely heavily on the use of debt financing.
Calculation:
Profit margin in % = (EBIT / Sales) × 100
Evaluation:
- +1 point: > 12 %
- 0 points: 6–12 %
- -1 point: < 6 %
4. Current price-earnings ratio (P/E)
Definition:
The price / earnings ratio describes the relationship between the current share price and the annual earnings per share. It describes how many years it takes for a company to generate the value of its shares as a profit. The P / E relates to the forecast earnings per share for the coming year.
Significance for the evaluation:
The P/E ratio is an important metric for assessing a company's earnings power and performance compared to others. The lower a stock's P/E ratio, the more attractively priced the stock appears.
Calculation:
P/E ratio = share price / earnings per share (expected for the next year)
Evaluation:
- +1 point: < 12
- 0 points: 12–16
- –1 point: > 16 or negative
Customized valuation for technology companies
To fairly account for this growth, adjusted thresholds are used for technology stocks:
Evaluation:
- +1 point: current P/E ratio < 22
- 0 points: current P/E ratio between 22 and 33
- -1 point: current P/E ratio > 33 or < 0
Note: Standard thresholds apply to all other industries.
5. Average P/E ratio of the last 5 years
Definition:
The five-year average P/E ratio smooths out short-term fluctuations and shows the long-term valuation compared to today's price.
Significance for the evaluation:
Significant deviations from the historical average can provide evidence of undervaluation or overvaluation.
Calculation:
P/E ratio (5 years) = share price / average earnings of the last 3 years + current + next year
Evaluation:
- +1 point: < 12
- 0 points: 12–16
- –1 point: > 16 or negative
Customized valuation for technology companies
To fairly account for this growth, adjusted thresholds are used for technology stocks:
Evaluation:
- +1 point: current P/E ratio < 22
- 0 points: current P/E ratio between 22 and 33
- -1 point: current P/E ratio > 33 or < 0
Note: Standard thresholds apply to all other industries.
6. Price change of the last 6 months compared to the index
Definition:
Percentage by which the share price has changed in comparison to the index in the last 6 months.
Significance for the evaluation:
Stocks that outperform the market show relative strength – a positive signal.
Calculation:
Price change in the last 6 months compared to the index = price change in the share in the last 6 months - price change in the index in the last 6 months
Evaluation:
- +1 point: > 5 %
- 0 points: ±5 %
- -1 point: < -5 %
7. Price change over the last 12 months compared to the index
Definition:
Percentage by which the price of the share has changed in comparison to the index over the past 12 months.
Significance for the evaluation:
Long-term relative strength signals market confidence in the company.
Calculation:
Price change in the last 12 months compared to the index = price change of the share in the last 12 months - price change of the index in the last 12 months
Evaluation:
- +1 point: > 5 %
- 0 points: ±5 %
- -1 point: < -5 %
8. Price momentum
Definition:
Price momentum detects trend changes by comparing 6- and 12-month performance.
Significance for the evaluation:
If a stock enters an uptrend, this is a possible entry point. In an uptrend, the stock has risen more strongly than the index over the past six months and significantly more strongly than the price change over the past 12 months.
Calculation:
Price change 6 months vs. price change 12 months (point value comparison)
Evaluation:
- +1 point: 6 months +1 and 12 months 0 or -1
- –1 point: 6 months –1 and 12 months 0 or +1
- 0 points: other cases
9. Expected profit growth
Definition:
Compares the expected profits of the current year with those of the next year.
Significance for the evaluation:
A higher profit estimate for the next year indicates a positive business development.
Calculation:
Expected earnings growth = ((earnings estimate next year – earnings estimate current year) / earnings estimate current year) × 100
Evaluation:
- +1 point: > 5 %
- 0 points: ±5 %
- -1 point: < -5 %
10. Change in profit estimate
Definition:
Examines whether analysts have adjusted their earnings forecasts within the last four weeks.
Significance for the evaluation:
Rising expectations indicate positive developments or new information.
Calculation:
Change in earnings estimate = (current estimate – earnings estimate 4 weeks ago) / earnings estimate 4 weeks ago) × 100
Evaluation:
- +1 point: > 5 %
- 0 points: ±5 %
- -1 point: < -5 %
11. Reaction to quarterly figures
Definition:
Public companies publish their quarterly report every quarter. On the day on which the numbers are announced, the percentage development of the share is compared with the development of the index.
Significance for the evaluation:
Strong reactions show how well or badly the figures were received by the market.
Calculation:
Reaction to quarterly figures = share price change on the day of publication – index price change (on the same day)
Evaluation:
- +1 point: > 1 %
- 0 points: ±1 %
- -1 point: < -1 %
12. Price-to-book ratio (P/B)
Definition:
The P/B ratio compares the share price with the "actual" value of the company – the book value. Book value is calculated by adding together everything the company owns (machinery, buildings, computers) and subtracting its debt.
Significance for the evaluation:
The P / B indicates whether the stock exchange price is higher or lower than the actual value per share. With a P / B below 1, one could theoretically buy the company for less money than it is worth according to the balance sheet.
However, this metric is of limited use for technology companies, as a large portion of their value often consists of intangible assets (e.g., software, data, brands) that are not fully reflected in the balance sheet. Therefore, the price-to-book ratio (P/B ratio) is not evaluated for technology stocks.
Calculation:
P/B = share price / equity per share
Evaluation:
- +1 point: < 1.5
- 0 points: 1.5–2.5
- –1 point: > 2.5
When is a stock a good buy? – and when should you sell it?
With the 12 key figures, you have a simple scoring system at your fingertips. Add up the ratings of all the key figures to get a total score. This shows you at a glance whether you should buy, hold or sell should. Evaluating stocks has never been so easy.
✅ Purchase recommendation:
Large companies: away +4 points
Small and medium-sized enterprises: away +6 points
❌ Sales recommendation:
Regardless of company size: at below 0 points (i.e. from -1 point)
If you already own a stock in your portfolio, you can hold it as long as the rating remains positive. If the score drops below 0, that's a clear signal to sell.
The principle is that simple: collect points, add up the total – evaluate stocks and then decide.
Tip: Don’t buy stocks too expensively
A useful additional filter: When buying a share, make sure that the current price at least 10% below the annual high This way you reduce the risk of getting in too expensively. distance refers to the distance between the current share price and the annual high (52-week high).
Conclusion: Evaluate stocks systematically and make informed decisions
If you want to evaluate stocks, these 12 key figures will help you systematically assess opportunities and risks – without any emotions or gut feeling.
Of course, you can collect and evaluate all the data yourself—it's a good start, and you'll learn a lot. But it takes time and effort.
Let TransparentShare do the work for you!
If you don't have time to search for all the data yourself, you can let TransparentShare do the work for you when evaluating stocks. TransparentShare evaluates over 1,200 stocks daily fully automatically – objective, data-based, and easy to understand. So you can make better decisions quickly.
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