The P/E ratio is popular, but it’s not always the best tool. If you rely only on P/E, you might miss key insights. So, which ratios to use instead of P/E? Here are smarter alternatives to help you evaluate stocks more effectively.

Why Look Beyond the P/E Ratio?

Which Ratios To Use Instead Of P/E and The P/E ratio has limits:

Doesn’t account for debt.
Ignores growth rates.
Can be skewed by one-time earnings changes.

Instead, consider these better metrics.

1. Price-to-Book (P/B) Ratio

The P/B ratio compares stock price to book value (assets minus liabilities).

Why use it?

Great for valuing asset-heavy companies (banks, real estate).
Helps spot undervalued stocks.

Formula:
P/B Ratio = Stock Price / Book Value Per Share

2. Enterprise Value-to-EBITDA (EV/EBITDA)

Which Ratios To Use Instead Of P/E: This ratio measures a company’s total value, including debt.

Why use it?

Better for comparing firms with different debt levels.
Useful for mergers and acquisitions.

Formula:
EV/EBITDA = (Market Cap + Debt – Cash) / EBITDA

3. Price-to-Sales (P/S) Ratio

The P/S ratio compares price to revenue.

Why use it?

Works for unprofitable companies.
Less prone to accounting tricks.

Formula:
P/S Ratio = Market Cap / Total Revenue

4. Dividend Yield

This shows how much a company pays in dividends relative to stock price.

Why use it?

Helps income-focused investors.
Indicates financial health.

Formula:
Dividend Yield = (Annual Dividend Per Share / Stock Price) x 100%

5. Free Cash Flow Yield (FCF Yield)

Measures cash generation relative to stock price.

Why use it?

Shows real profitability.
Helps spot cash-rich companies.

Formula:
FCF Yield = Free Cash Flow / Market Cap

6. PEG Ratio (Price/Earnings-to-Growth)

Adjusts P/E for growth rates.

Why use it?

Better for high-growth stocks.
Balances value and growth.

Formula:
PEG Ratio = P/E Ratio / Earnings Growth Rate

7. Debt-to-Equity (D/E) Ratio

Measures financial leverage.

Why use it?

Shows risk from borrowing.
Helps avoid overleveraged firms.

Formula:
D/E Ratio = Total Debt / Total Shareholders’ Equity

8. Return on Equity (ROE)

Indicates how well a company uses investments.

Why use it?

Measures management efficiency.
Helps compare profitability.

Formula:
ROE = Net Income / Shareholders’ Equity

When to Use Which Ratio?

Value Investing? Try P/B or P/S.
Growth Stocks? PEG is ideal.
Dividend Stocks? Check Dividend Yield.
High Debt? Use D/E or EV/EBITDA.

How StockUnlock Helps You Analyze Stocks Beyond P/E Ratios

If you’re looking for a smarter way to evaluate stocks beyond just the P/E ratio, StockUnlock is a powerful tool that can help. This innovative software provides deep financial insights using advanced metrics, making stock analysis easier and more accurate.

What is StockUnlock?

StockUnlock is an AI-powered stock analysis platform that helps investors:

Compare multiple financial ratios (P/B, EV/EBITDA, PEG, etc.) in one place.
Screen stocks based on custom criteria.
Get real-time alerts when key ratios change.
Visualize trends with interactive charts.

Unlike traditional tools that focus only on P/E, StockUnlock gives a holistic view of a company’s financial health.

Key Features of StockUnlock for Ratio Analysis

1. Multi-Ratio Stock Screening

Instead of manually calculating each ratio, StockUnlock lets you:

Filter stocks by P/B, EV/EBITDA, P/S, and more in seconds.
Set custom thresholds (e.g., “Show me stocks with P/B < 1.5”).
Export data for further analysis.

2. Automated Financial Health Scoring

StockUnlock assigns a “Financial Health Score” based on:

Profitability (ROE, ROIC)
Debt levels (D/E ratio)
Cash flow strength (FCF Yield)
Growth potential (PEG ratio)

This helps you quickly spot strong or risky investments.

3. Historical Ratio Tracking

See how a company’s ratios have changed over time:

Did the P/B ratio drop suddenly?
Is EV/EBITDA improving?
Is dividend yield stable?

Trend analysis helps predict future performance.

4. Peer Comparison Tool

Compare a stock against competitors using:

Side-by-side ratio breakdowns.
Industry benchmarks.
Relative valuation insights.

This helps you see if a stock is truly undervalued.

5. AI-Powered Stock Recommendations

StockUnlock’s AI suggests stocks based on:

Your preferred ratios (e.g., low P/S, high ROE).
Market trends.
Risk tolerance.

It’s like having a 24/7 stock analyst working for you.

How to Use StockUnlock for Better Investing

Step 1: Set Your Investment Strategy

Value Investing? Focus on P/B, P/S, and FCF Yield.
Growth Investing? Track PEG and ROE.
Dividend Investing? Monitor Dividend Yield and payout ratios.

Step 2: Run Custom Screens

Filter for stocks with P/E < 20 AND P/B < 2.
Find companies with EV/EBITDA below industry average.
Screen for high ROE + low debt.

Step 3: Analyze Trends & Alerts

Check if key ratios are improving or declining.
Set alerts for when a stock’s P/S ratio drops below a threshold.

Step 4: Compare & Decide

Use the peer comparison tool.
Review AI recommendations.
Make data-driven investment choices.

Why StockUnlock Beats Manual Ratio Analysis

Manual Analysis	StockUnlock
Time-consuming calculations	Instant ratio updates
Limited historical data	10+ years of ratio trends
No AI insights	Smart stock recommendations
Static spreadsheets	Interactive dashboards
Misses industry benchmarks	Built-in peer comparisons

StockUnlock saves hours of research and reduces emotional bias in investing.

FAQ: Which Ratios To Use Instead Of P/E?

1. Why is P/E ratio sometimes misleading?

The P/E ratio doesn’t account for debt, growth rates, or one-time earnings distortions. That’s why metrics like EV/EBITDA and PEG ratio are often better.