Book value gives investors an indication of what each share is worth according to the company's financial statements. This can be compared with the company's market value, but this may be difficult to do with high growth companies or firms that are considered to be knowledge based. The retained earnings section gives investors an idea of the amount of earnings that the company has retained for reinvestment in the firm. Changes and amounts used for various capital expenditures should be evaluated by the investor. Moving to the income statement, investors need to evaluate revenues, expenses and earnings.
Revenues provide a good indication of the volume or size of business that the company conducts.
This is often reflected in the market capitalization of many companies. Companies that have a total market cap that far exceeds total annual sales can be considered more riskier than companies that have a smaller gap between the two. One good proxy of a value of a company, especially one with no earnings, is total annual sales divided by total market capitalization. This number should be compared with other companies in a similar industry and with previous valuations. Other factors such as revenue growth should be considered.