Editing Investment (section)

==Investment valuation==
{{see|Valuation (finance)|Business valuation}}
{{also|Valuation using discounted cash flows|Valuation using multiples}}
[[Free cash flow]] measures the cash a company generates which is available to its debt and equity investors, after allowing for reinvestment in [[working capital]] and [[capital expenditure]]. It is often used by investors as a way of measuring profitability of the company. High and rising free cash flow, therefore, tend to make a company more attractive to investors. Free cash flow can be attractive to investors because having high free cash flow can be a good indicator for high dividend or interest payments.<ref>{{Cite web |title=Free Cash Flow (FCF): How to Calculate and Interpret It |url=https://www.investopedia.com/terms/f/freecashflow.asp |access-date=2025-05-01 |website=Investopedia |language=en}}</ref>

The [[debt-to-equity ratio]] is an indicator of [[capital structure]]. Debt-to-equity ratio measures how much debt is used to finance a company, compared to equity. A high debt-to-equity ratio means that a company relies more on debt to finance operations, and is much riskier to investors.<ref>{{Cite web |last=Almeida |first=Andrew |date=December 12, 2022 |title=Debt-to-Equity (D/E) Ratio: Meaning and Formula |url=https://stockanalysis.com/term/debt-to-equity-ratio/ |access-date=2025-05-01 |website=StockAnalysis |language=en}}</ref> A high proportion of [[debt]], reflected in a high debt-to-equity ratio, tends to make a company's [[earnings]], free cash flow, and ultimately the returns to its investors, riskier or [[volatility (finance)|volatile]]. Investors compare a company's debt-to-equity ratio with those of other companies in the same industry, and examine trends in debt-to-equity ratios and free cashflow.

Earnings per share (EPS) is another way to evaluate a stock and its profitability. Earnings per share is measured by dividing the net income of a company by the total number of outstanding shares. A higher earnings per share is attractive to investors because it typically means the company is more profitable. EPS shows how much money a company makes for each share of its stocks.<ref>{{Cite web |title=Earnings Per Share (EPS): What It Means and How to Calculate It |url=https://www.investopedia.com/terms/e/eps.asp#:~:text=Earnings%20per%20share%20(EPS)%20is%20a%20company's%20net,a%20widely%20used%20metric%20for%20estimating%20corporate%20value. |access-date=2025-05-01 |website=Investopedia |language=en}}</ref>