Understanding the Valuation Indicator
The Valuation indicator assesses whether a stock is trading at an attractive price relative to its fundamental value. It combines multiple valuation metrics for a balanced view.
What It Measures
- P/E Ratio: Price relative to earnings per share
- P/B Ratio: Price relative to book value (assets minus liabilities)
How to Read the Status
| Status | Typical Values | Meaning |
|---|---|---|
| 🟢 Good | P/E ≤ 15, P/B ≤ 2 | Potentially undervalued — attractive entry point |
| 🟡 Neutral | P/E 15-20, P/B 2-4 | Fair value — reasonable price for quality |
| 🔴 Bad | P/E ≥ 30, P/B ≥ 8 | Premium valuation — high expectations priced in |
Sector Context
Valuation varies by sector. Utilities typically trade at 15-18x earnings while tech stocks often exceed 30x. This indicator provides a general guide — always compare to industry peers.
What to Do
- Good: Attractive price if fundamentals are solid. Check other indicators to confirm quality.
- Neutral: Fair price. Focus on dividend quality and growth rather than valuation upside.
- Bad: High growth expectations priced in. Consider waiting for pullback or accepting lower total return.