Choosing which shares to buy is one of the hardest parts of investing. There are over 2,000 companies listed on the London Stock Exchange, and they all look different on paper. How do you know whether Lloyds is a better buy than Barclays? Whether AstraZeneca offers more value than GSK? Whether a small AIM-listed company is worth the risk compared to a FTSE 100 stalwart?
The answer is comparison. And it's simpler than most people think. This guide walks you through the key metrics used to compare UK shares, explains what they actually mean, and shows you how to use free tools to do it yourself.
Why Comparing Shares Matters
Looking at a single company's share price tells you almost nothing on its own. A stock trading at £5 isn't cheaper than one at £50 — that's not how it works. What matters is the relationship between the price and what the company actually earns, owns, and pays out to shareholders.
Comparing shares forces you to look beyond the headline number. When you stack two companies side by side using the same metrics, patterns emerge. You start to see which one is growing faster, which is better value, which is returning more to shareholders, and which carries more risk. It turns gut feeling into informed decision-making.
The Key Metrics for Comparing UK Shares
You don't need to be a financial analyst to compare shares effectively. Here are the metrics that matter most, explained in practical terms.
Price-to-Earnings Ratio (P/E)
The P/E ratio tells you how much investors are willing to pay for each pound of a company's earnings. It's calculated by dividing the share price by earnings per share. A company with a share price of £10 and earnings of £1 per share has a P/E of 10.
A lower P/E generally suggests a stock is cheaper relative to its earnings, while a higher P/E suggests investors expect strong future growth. The average P/E for FTSE 100 companies tends to sit around 12-15, but this varies hugely by sector. Banks often trade on single-digit P/Es, while technology companies can trade on P/Es of 25 or more.
The key is to compare P/E ratios within the same sector. Comparing the P/E of a bank to a tech company is like comparing apples to oranges. Our stock screener lets you filter by sector and sort by P/E to quickly spot which companies in a given industry look over- or under-valued relative to peers. For a deeper explanation, see P/E ratio in our trading glossary.
Dividend Yield
Dividend yield shows how much a company pays out in dividends each year relative to its share price, expressed as a percentage. If a company's shares are £10 and it pays 50p per share annually, the dividend yield is 5%.
For income-focused investors, dividend yield is often the first metric they check. The UK market has historically been generous with dividends compared to the US, with many FTSE 100 companies yielding 4-6% or more. However, a very high yield can sometimes signal trouble — it may mean the share price has fallen sharply, and the dividend might be cut.
When comparing dividend stocks, look at dividend yield alongside dividend cover (how many times the company's earnings cover the payout) and the dividend history (has it grown, stayed flat, or been cut in the past?). This gives you a much fuller picture than yield alone.
Market Capitalisation
Market cap is the total value of all a company's shares. It tells you the size of the business in market terms. FTSE 100 companies are generally large-cap (over £5 billion), FTSE 250 companies are mid-cap, and AIM companies are often small-cap or micro-cap.
Size matters because it affects risk and growth potential. Large-cap stocks tend to be more stable, pay dividends, and move less dramatically. Small-cap stocks can grow faster but are more volatile and carry higher risk. When comparing two companies, knowing their relative size helps you understand what you're comparing and what kind of risk-return trade-off you're looking at.
Earnings Per Share (EPS) Growth
A company's P/E ratio is a snapshot, but EPS growth tells you the direction of travel. Is the company earning more year-on-year, or are profits declining? Consistent EPS growth over 3-5 years is one of the strongest indicators of a healthy business.
When comparing two stocks with similar P/Es, the one with faster EPS growth is often the better value because you're paying the same price for a business that's improving more quickly. You can check earnings trends on our individual stock pages, which show key financial data for every listed company.
Return on Equity (ROE)
ROE measures how efficiently a company uses shareholders' money to generate profit. It's expressed as a percentage — an ROE of 15% means the company generated 15p of profit for every £1 of shareholder equity.
This metric is particularly useful when comparing companies of different sizes. A small company and a large company can both have an ROE of 20%, telling you they're equally efficient at generating returns. Consistently high ROE (above 15%) combined with low debt is generally a sign of a quality business.
Debt-to-Equity Ratio
This shows how much debt a company is carrying relative to its equity (what shareholders own). A ratio of 0.5 means the company has 50p of debt for every £1 of equity. Lower is generally safer, though some industries like banking and utilities naturally operate with higher leverage.
When comparing shares, always check debt levels. Two companies might look similar on P/E and growth, but if one is loaded with debt and the other is debt-free, the risk profiles are very different. During economic downturns, heavily indebted companies are the ones most likely to cut dividends or issue new shares to raise cash.
How to Compare Shares: A Step-by-Step Approach
Now that you know what to look for, here's a practical process for comparing UK shares.
Step 1: Pick Your Candidates
Start by narrowing down to 2-4 companies in the same sector. The easiest way is to use a stock screener — filter by sector, market cap range, or minimum dividend yield to get a shortlist. For example, if you're interested in UK banks, you might screen for all FTSE-listed financial services companies with a market cap above £1 billion.
Step 2: Pull Up the Numbers Side by Side
Once you have your shortlist, use ChartsView's stock comparison tool to view them side by side. The compare tool displays the key metrics we've discussed — P/E, dividend yield, market cap, and more — in a single view, so you don't have to flip between tabs or scribble numbers on a notepad.
Step 3: Look for Outliers
Scan across the metrics and look for anything that stands out. Is one company trading on a much lower P/E than its peers? That could be value, or it could be a warning sign. Is one offering a significantly higher dividend yield? Check whether it's sustainable by looking at dividend cover and earnings trends.
Step 4: Check the Trend
Static numbers only tell half the story. Look at how the metrics have changed over time. A company with a P/E of 10 that had a P/E of 20 last year might be cheap because the share price dropped — and you need to understand why. Has revenue been falling? Did they issue a profit warning? Our stock pages show historical data to help you spot these trends.
Step 5: Read the Context
Numbers don't exist in a vacuum. Before making a decision, check the latest news on our news feed for any recent developments — management changes, regulatory issues, earnings surprises, or sector-wide trends. A company might look great on paper but be facing a headwind that isn't yet reflected in the numbers. Our daily briefing is also useful for broader market context.
Common Mistakes When Comparing Shares
A few pitfalls trip up beginners when comparing stocks. The first is comparing across sectors without adjusting expectations. A utility company and a biotech company operate in completely different worlds — their "normal" P/E ranges, growth rates, and dividend policies are totally different.
The second is focusing on just one metric. A stock with a high dividend yield but declining earnings and rising debt is not a good income investment — it's a value trap. Always look at multiple metrics together to build a complete picture.
The third is ignoring qualitative factors. The numbers might say one company is cheaper, but if its management team has a track record of poor capital allocation or the industry is in structural decline, the discount exists for a reason. Use the numbers as a starting point, not the final answer.
Start Comparing UK Shares for Free
ChartsView gives you everything you need to compare UK shares without paying a penny. Our stock comparison tool lets you view any stocks side by side across all the key metrics. The stock screener helps you build your shortlist by filtering over 2,000 UK and US-listed stocks by fundamentals. And if you want to see what other traders think, our share tips leaderboard tracks community picks with full transparency.
Once you've found stocks you like, add them to your free portfolio tracker to monitor performance over time. It's all free, and you can get started in under a minute.