You look at book value. You have to actually open up the financial statements and peek inside. See if their assets are more than their liabilities and put a price on it.
So does that mean book value per share should theoretically be a price floor? I've always wondered about this too as P/E is meaningless with companies that are losing money.
'value' in the classic meaning of value such cashflow, assets, balance sheets, debt, and calibre of management and overall economic conditions. p/e isn't the only thing that value is derived.
As for the trading 'business',,you need positive cashflow,,no paper profits...cash needs to come out of your account. a good business needs positive cashflow OUT.
One of my measures is sales. It is rather important for me. With sales you cannot hide, tweak or twiddle the number. Either you sold this or not. Yes you can defer, but at the end of the day you either sold something or not. A company that has increasing sales, but decreasing profits deserves a second look. However a company that has increasing EPS and decreasing sales is a warning sign. Think of it as follows. You are company and your sales are going down, and in response you start cutting staff boosting EPS. Though is that a good idea for the long term health of the company? Answer no... For the financials I am looking at sales and cost of sales. For some companies it looks good and others not so good.
With sales you cannot hide, tweak or twiddle the number. Either you sold this or not. Yes you can defer, but at the end of the day you either sold something or not. ================================ Imo, I always wondered why there aren't any former IRS auditors running hedge funds. Access to income tax records would be a nice edge.