Sharia compliant Ratios & "Intrinsic Value" Proxy

Interest-Bearing Debt ≤33% of Total Assets Avoids excessive interest-based financing (Riba). Non-Compliant Income ≤5% of Total Revenue Ensures income from non-permissible sources (like interest on cash) is negligible. Accounts Receivables ≤49% of Market Capitalization Avoids companies with too much uncollected cash, which is seen as similar to debt. Price-to-Earnings (P/E) Ratio ≤25 (or significantly below the sector/Nifty P/E) Your main value indicator. Lower P/E suggests the stock is cheaper relative to its current profits. (The Nifty 50 P/E is often above 25). Price-to-Book (P/B) Ratio ≤4 (Varies widely by sector) Useful for asset-heavy companies (like Cement, Metals). Low P/B means the stock is cheap relative to its balance sheet value. Return on Equity (ROE) ≥15% (Higher is better) Indicates good management and profitability. A low P/E + high ROE is a classic sign of an undervalued quality company.

by Ashhar