What are the key financial metrics to review for a stock?

To evaluate a stock's financial health and potential for investment, consider the following key financial metrics:

1. **Price-to-Earnings (P/E) Ratio**: This ratio helps determine the market value of a stock compared to its earnings. A lower P/E ratio may indicate a stock is undervalued, while a higher ratio could suggest it is overvalued or has growth expectations.
2. **Earnings Per Share (EPS)**: This metric shows how much profit a company generates for each share of stock. A higher EPS can indicate better profitability and may contribute to a higher stock price.
3. **Return on Equity (ROE)**: ROE measures how effectively a company uses shareholders' equity to generate profit. A higher ROE is generally preferred as it indicates better management of equity.
4. **Debt-to-Capital Ratio**: This ratio shows the proportion of a company's financing that comes from debt. A lower debt level can be preferable as it may indicate less financial risk.
5. **Free Cash Flow**: Free cash flow represents the cash a company generates after accounting for operating expenses and capital expenditures. Positive free cash flow can indicate financial health and the ability to invest in growth opportunities.
6. **Price-to-Book (P/B) Ratio**: The P/B ratio compares a company's market value to its book value. A lower P/B ratio may suggest a stock is undervalued based on its assets.
7. **Interest Coverage Ratio (ICR)**: This ratio measures a company's ability to pay interest on its debt. A higher ICR is generally preferred as it indicates a lower risk of default.

By examining these financial metrics, investors can gain a comprehensive understanding of a stock's valuation, profitability, equity management, and overall financial health, which are all important factors in making informed investment decisions.