All these parameters will help us in comparing the performance of one company with another.
EPS - This denotes the earning capacity of the company. For every share of say Rs.10/- if a company 'A' earns Rs.30/- and a company 'B' in the same industry earns Rs.20/-, the company 'A's profitability is considered to be better.
p/e ratio is market price divided by earnings per share. A company having lesser p/e ratio is better than a company having a higher p/e ratio.
price to book value - book value is (reserves and surplus divided by share capital multiplied by face value of the share) + face value of the share. If the price as compared to the book value is less, the company's shares are considered to be quoting at a lesser price.
Dividend payout ratio - This shows the dividend policy of the company. A company may earn an EPS of Rs.8/- and declare Rs.5/- per share as dividend and transfer Rs.3/- to reserves; another company may earn Rs,25/- as EPS and declare Rs.5/- per share as dividend and transfer Rs.20/- to reserves. the second company is very conservative and they are raising their book value by increasing the reserves and also by reducing the dividend payout their cash position will be better and their interest liability may be less.
Dividend yield - this is dividend divided by the cost price of the share expressed as a percentage.
Return on equity - this is the ratio of Net profit to the equity capital