The P/E multiple or P/E ratio is calculated only for common shares. This ratio calculates the trailing P/E ratio, since it is based on the previous 12 months earnings. The P/E multiple should be used to evaluate companies which are in the same industry, in order for the results of a comparison to be meaningful. The P/E multiple varies widely from industry to industry. In simplistic terms, the P/E multiple indicates the price that investors are willing to pay today for each dollar of a corporation's earnings. The P/E multiple is one of the most widely used financial indicators or tools employed by investors.

Book Value per Common

The book value per common share is an indication of the margin of safety for common shareholders. This ratio indicates the dollar amount that would be available to be distributed to a common shareholder in the case of dissolution of the company. A more conservative estimate of the margin of safety would calculate the tangible net worth/per common share. Academic research has shown that the ratio which calculates price/book value is a good predictor of future investment results, and that stocks selling at low price/book value tend to outperform stocks selling at high price/book value multiples.

Earnings per Common Share

Earnings per common share or EPS is one of the most common financial ratios employed by investors and is frequently reported in the financial press. High net earnings per common share can indicate that management has the ability to pay dividends to the common shareholders. Conversely, low or negative EPS generally indicates that no dividends should be expected.