Reading a stock's financials
A company's financials answer a few plain questions: is it making money, is it growing, how much does it owe, and what are investors paying for it? Here's what each measure means and the ranges commonly described as healthy. Then try the screener below to see which stocks in a sector match the filters you choose.
Rules of thumb vary by industry, and no single number tells the whole story. For education only, not investment advice.
What to look for
Profitability (earnings per share)
In the screenerIs the company making money?
Earnings per share (EPS) is profit divided by the number of shares. Positive trailing EPS means the company earned a profit over the last twelve months.
Common ranges, weaker to stronger
- Negative: Losing money. Common for young, fast-growing companies, and riskier.
- Positive: Profitable over the last year.
- Positive and growing: Profitable, with earnings rising year over year.
What's considered better: Consistent, growing profits are generally considered a sign of a healthier business.
Keep in mind: One year can be misleading: a one-time charge can push EPS negative, and a one-time gain can inflate it.
More in the glossary →P/E compared with the sector
In the screenerHow much are investors paying for each dollar of profit?
The price-to-earnings ratio divides the share price by earnings per share. It's most useful next to similar companies, because normal P/E levels differ a lot between sectors.
Common ranges, weaker to stronger
- Well above the sector median: Investors expect faster growth, or the stock is pricey for its earnings.
- Near the sector median: Valued about like its peers.
- Below the sector median: Cheaper than peers for its earnings, sometimes for a reason (slower growth or problems).
What's considered better: A lower P/E than peers with similar growth is commonly described as better value; a low P/E alone isn't.
Keep in mind: P/E can't be used for companies with losses, and a low P/E can reflect real trouble rather than a bargain.
More in the glossary →Revenue growth
Coming to the screenerAre sales growing?
How much the company's total sales grew compared with a year earlier, as a percentage.
Common ranges, weaker to stronger
- Negative: Sales are shrinking.
- 0–10% a year: Steady growth, typical of mature companies.
- Above 10% a year: Strong growth.
What's considered better: Faster, steady growth is generally considered stronger than growth that jumps around.
Keep in mind: Growth bought with big losses or acquisitions isn't the same as growth from selling more.
More in the glossary →Profit margin
Coming to the screenerHow much of each sales dollar becomes profit?
Net profit divided by revenue. A 15% margin means 15 cents of profit per dollar of sales.
Common ranges, weaker to stronger
- Below 5%: Thin margins: little room if costs rise.
- 5–20%: Healthy for many industries.
- Above 20%: Strong margins, often a sign of pricing power.
What's considered better: Higher and steady margins are generally considered better than low or shrinking ones.
Keep in mind: Normal margins differ by industry: grocery stores run thin margins; software companies run wide ones.
More in the glossary →Debt-to-equity
Coming to the screenerHow much does the company rely on borrowing?
Total debt divided by shareholders' equity (what the company owns minus what it owes).
Common ranges, weaker to stronger
- Above 2: Heavy borrowing: more risk if business slows or rates rise.
- 1–2: Moderate.
- Below 1: Conservative: more equity than debt.
What's considered better: Lower debt is generally considered safer, especially for companies with uneven profits.
Keep in mind: Banks, utilities, and real estate companies normally carry much more debt; compare within the sector.
More in the glossary →Current ratio
Coming to the screenerCan the company pay its bills over the next year?
Short-term assets (cash and things that turn into cash soon) divided by short-term debts.
Common ranges, weaker to stronger
- Below 1: Short-term debts exceed short-term assets.
- 1–1.5: Adequate.
- Above 1.5: Comfortable cushion.
What's considered better: A ratio comfortably above 1 is generally considered healthier.
Keep in mind: Very high ratios can mean cash sitting idle; some steady businesses run below 1 safely.
More in the glossary →Free cash flow
Coming to the screenerDoes the business generate cash after paying for itself?
Cash from operations minus spending on equipment and buildings: the cash left to pay down debt, pay dividends, or reinvest.
Common ranges, weaker to stronger
- Negative: The business uses more cash than it brings in.
- Positive: The business funds itself.
- Positive and growing: Rising cash generation.
What's considered better: Steady, positive free cash flow is generally considered a strong sign.
Keep in mind: Young companies investing heavily can have negative free cash flow for years by design.
More in the glossary →Return on equity
Coming to the screenerHow well does the company turn shareholders' money into profit?
Net profit divided by shareholders' equity, as a percentage.
Common ranges, weaker to stronger
- Below 10%: Modest returns.
- 10–15%: Solid.
- Above 15%: Strong.
What's considered better: Higher, steady returns are generally considered better.
Keep in mind: Heavy borrowing can inflate return on equity; check it alongside debt.
More in the glossary →Company size (market cap)
In the screenerHow big and established is the company?
Share price times shares outstanding: the market's total value of the company.
Common ranges, weaker to stronger
- Small (under $2 billion): More room to grow, and more ups and downs.
- Mid ($2–10 billion): In between.
- Large (over $10 billion): Established, usually steadier.
What's considered better: Neither is better on its own; size mostly changes how much a stock tends to swing.
Keep in mind: Contests only allow companies worth at least $300 million.
More in the glossary →Try it: screen a sector
Choose a sector and the filters you want. The results list the stocks that match; matching doesn't make a stock a good pick, and not matching doesn't make it a bad one. For every filter, saved screens, and adding results to a contest, open the full Stock Screener.
3 of 5 stocks in Technology match your filters
Median P/E in Technology: 23.3 (profitable companies we carry).
| Symbol | Latest | % Change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| AAPLApple Inc. | $153.47 | down $2.79 | down 1.78 percent | $2.36T | 13.8 | 33 | down 8.35 percent | — | |
| NVDANVIDIA Corporation | $45.88 | down $1.81 | down 3.80 percent | $1.12T | 20.3 | 47 | up 0.17 percent | Mon, Oct 26After close | |
| INTCIntel Corporation | $53.00 | up $0.74 | up 1.42 percent | $227.9B | 23.3 | 33 | down 9.01 percent | Mon, Nov 2Before open |
Prices: Mock data (development only) · Delayed 15 min
Earnings (P/E): Mock data (development only)
RSI: momentum over the last 14 sessions, from 0 to 100. vs 50-day: today's price compared with its 50-day average. Both computed from daily closing prices.
A screener lists stocks that match the filters you chose. It isn't a recommendation to buy or sell anything. Results cover the stocks we carry.