# Value Creation: Ratio Analysis Of TD Bank

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2. Value Creation – Ratio Analysis There are four key ratios that are detrimental in evaluating the market value of a company’s stock: Equity to Book Value Ratio, Price-Sales Ratio, Price-Earnings Ratio, and Earnings Per Share. The first ratio mentioned, Equity to Book Value Ratio, measures the market value of a company’s stock. It is determined through dividing the current price of the stock by the book value per share. Price-Sales Ratio compares the company’s stock to their total revenue or sales. It is important since in certain cases, companies can have negative earnings, making it more important for some investors rather than PE Ratio. It is calculated through dividing the stock price by revenue. Price-Earnings Ratio key purpose is to …show more content…
The final ratio, Earnings Per Share measures the amount of company profit that is allocated to each share of stock and is useful in determining a company’s profitability.
For the first ratio mentioned above, Equity to Book Value, TD Bank resulted in 1.98, Chase Bank resulted in a 1.65 and Bank of America resulted in a 1.29. As you can see, the results were pretty much equal across the board, with TD Bank having the slight edge of the other two banks. In other words, the market value of the three stocks are very similar, with TD Bank having a slightly higher value. Moving on to the second key measurement, Price-Sales Ratio, TD Bank resulted in 11.91, Chase Bank resulted in a 15.10 and Bank of America resulted in a 16.89. Similar to the Equity to Book Value, the Price-Sales Ratios were also close among the three banks. The only difference being with TD Bank, as their ratio spread from Chase Bank, the next closest result, was 3.2. These results indicate that