What Does The P/E Or Price Per Earnings Ratio Mean When Rating A Stock For The Future?

From Investing Forum:

what does the p/e or price per earnings ratio mean when rating a stock for the future? what is the p/e and what does it indicate about the future of the stock.

Answer: p/e is the price of the stock divided by the earnings of the company. People are willing to pay higher p/e for a growth stock. When comparing companies p/e's you need to factor in growth comparisons, industry comparisons, and overall market comparisons. It wouldn't be smart to compare the p/e of a bank vs the p/e of a tech stock. There are too different. You need to compare apples with apples and then compare apples to the market basket.

How Important Is The P/E Ratio To You, Relative To Other Simple Boer (Back Of The Envelope) Calculations?

From Investing Forum:

How important is the P/E ratio to you, relative to other simple BOER (back of the envelope) calculations? Would you say, for example, that a higher P/E ratio always mean more risk and expected return? IS a low P/E a warning sign? Really? Take TEFL for example, Go ogle Finance reports a PE of about 4.5 but their earnings and dividend yield is phenomenal. *are

Answer: The current P/E reflects investors' net estimate of the future course of earnings, in terms of growth and risk/stability. Since it is the price level that investors are actually trading at, it's worth paying attention to compared to most individual opinions or even most analyst opinions. As a BOER figure, I regard a P/E as important as a P/B for quick and dirty valuation comparisons and perspective.

P/E Ratio ~ Why Is It Considered To Get Your Money Back In A Number Of Years?

From Investing Forum:

P/E ratio ~ why is it considered to get your money back in a number of years? I don't get it. Let's say that a company has a p/e ratio of 14 and pays dividends per share of pence, why is it considered that you get your money back in 14 years? The investor only gets the dividends per share right?

Answer: The P/E is the price of the company shares divided by its earning per share. If you assume that the earnings will remain constant in perpetuity, then this is the same thing as the number of years it will take to get your money back. Speaking simplistically, the higher the P/E, the greater the number of years it will take to "get your money back". This raises the question: "why do different companies have different ratios, and why don't I just buy stocks on low P/Es?" The answer is: 1. different companies have different ratios because some might be riskier (higher risk tends to reduce P/E) or they have different growth prospects (high P/E stocks have better expectation of growth). Prevailing interest rates and market appetite for risk tend to affect P/E ratios of the market as a whole, too. 2. companies with low P/Es tend to do better, as a class, than those on high P/Es. Market participants tend to become over-excited about high-growth stocks, and hence pay too much for them; and vice verse for low P/E stocks. Over time, the market tends to correct these mistakes, as hot stocks don't perform as well as expected, and troubled companies do better than expected. A word of warning, though: cyclical stocks (those companies which are highly sensitive to the general economy) tend to trade at low P/Es during the good times, as investors anticipate bad times ahead. This can sucker investors into "value traps": investors buy into companies at the top of the cycle thinking that they have bought cheap companies, only to see those earnings evaporate shortly after and the share price plummet.

How Do You Determine What Is A Good Price Of A Stock? How Do You Indicate Whether The P/E Matches Price Per?

From Investing Forum:

How do you determine what is a good price of a stock? How do you indicate whether the p/e matches price per? How do you determine what is a good price of a stock? How do you indicate whether the p/e matches price per share?

Answer: p/e by itself is not a very good indicator. p/e/growth rate seems a little arbitrary -- a 'perfect' value of 1 means the p/e is the same number as the current earnings growth rate. I do use this in deciding if a stock is 'good', but not so much to judge good price. cash flow (price to cash flow under 10), low number for price to sales (varies by sector - low margins & low price/sales go together), top line revenue growth rate. Dividend payer is a plus, but payout must be 55% or less. I rarely buy stock of a company with no debt -- if they are such a good bu sines why are they not leveraging their capital? But I'm very reluctant to buy if debt exceeds 50% of market cap. Financials are different -- you need to include book value, cash flow is not as relevant. These indicators are a lot harder for a company to play around with than just earnings, which theoretically can be moved short term to meet analyst expectations.

Could I Value A Company Based On P/E Of A Similar Company In London Stock Exchange?

From Investing Forum:

Could I value a company based on P/E of a similar company in London Stock Exchange? The public company in LES has a P/E ratio of 272. So, should I be valuing my company based on our profit x 272.

Answer: Definitely not. The P/E ratio is only one aspect of a company's performance and is only good if you compare it strictly to other companies within the SAME industry, with similar debt and growth, etc. A P/E of 272 is an unbelievably high and non-conforming ratio. The typical P/E of a company is only in the range of 10-20. A super fast growing company with increasing revenue and profits is the only possibility of a sustainable high P/E ratio. Never use a single company to compare yours against, but rather use industry averages and you are coming much closer to a correct valuation.

What Kind Of P/E Ratio Do I Look For When Investing In Stocks For The Long Term?

From Investing Forum:

What kind of P/E ratio do I look for when investing in stocks for the long term? P/E ratio is Price-Earnings Ratio, but do I pick stocks with a high P/E or a low P/E?

Answer: You want lower P/Es. A high P/E ratio indicates that the stock is already "too expensive." But recognize that average P/E ratios will very by sector and industry.

How Would I Find The P/E Ratio Of A Firm Like Pepsi Co, Inc Before I Invest?

From Corporations Forum:

How would I find the P/E ratio of a firm like Pepsi Co, Inc before I invest? What would be a firm’s P/E ratio hypothetically if the company issues equity in order to raise $10 million of capital? What is the firm’s forward P/E ratio if it issues debt? Explain the difference.

Answer: Go to this link http://finance.yahoo.com/q?s=PEP It is the page for Pepsi co, Inc. on Yahoo Finance. The P/E was 16.15 as of last Friday's closing price of $56.70. Of course the P/E will change on a daily basis. The P/E ratio is a valuation of a company's current share price compared to its per-share earnings. Calculated as: Market value per share divided by Earnings per share. Maybe Pepsi co is not a good example because of the size of the company and the number of shares outstanding. In theory the market value might be reduced slightly because when more shares are issued the price per share tends to go down. However, Pepsico's market capitalization is so large (at over $88 billion) that $10,000,000. in additional equity issued is the proverbial "drop in the bucket". The same goes for issuance of debt. The additional interest expense on $10,000,000. for a company of this size would be immaterial.

How Many Semesters Or Years Of P.E Do You Have To Take In High school In The State Of Texas?

From Other - Education Forum:

How many Semesters or years of P.E do you have to take in high school in the state of Texas? I really hate athletics and P.E but I want to get it over with!! I have already taken one semester, and I think you have to have three semesters but I am not sure, does anyone know or have a pretty good idea of what it might be?

Answer: Why don't you call your school counselor?

How Do You Get Your P.E Grade And Band Grade If You Are Being Home Schooled?

From Home Schooling Forum:

How do you get your P.E grade and Band Grade if you are being home schooled? I'm about to go into home schooling/ Distance education. How do I get my P.E, band, and technology grade?

Answer: This is the best thing about homeschooling...you are not stuck in a rut to have to do it the way the public school does. It depends on your state requirements but most high school credit is based on the Carnegie unit so you can get credit with time or curriculum. For example, you can order a traditional health curriculum and get P.E. credit for it. OR you could do workouts ( at a gym, with a group, or by yourself at home) and track your time. usually you just need a half credit so plan on 60 hours of "sweating" There are also some home school groups which have organized PE classes you can use towards your credit. Oh, and don't forget if you play a sport on a team you can count that toward your PE time as well. Band or Technology....here are my suggestions: You may order a traditional music curriculum and get a music/arts credit. OR you could take lessons and accumulate the time for a half credit for music. Start a band--that could also add to your numbers and enjoyment in playing...or join a band if you don't want to start one. See if you can perform somewhere and be sure to add that to your extracurricular activities on your transcript. Colleges like to see you doing stuff outside of just the books so you can be creative with this. Some churches have bands so if you play with your church band you could get service hours(also good on the transcript) or go play at a nursing home, etc. and get your service hours that way. Technology is much the same way but another idea would be to check into a tech school or junior college in your area about taking any of these classes as a dual enrolled student...that means you get both high school and college credit for your classes so you could take tech, music or PE that way too. See what I mean by all the freedom you get?! :)

How Do You Find The P/E Ratios Through Company Websites?

From Investing Forum:

How do you find the P/e ratios through company websites? I have been going through company's websites to research stock and I am having a hard time finding the P/E ratio. I know the equations but when I get to the websites its not in the net income/ outstanding share format

Answer: Most companies do not report P/E's as they change day to day based on the price of the stock. Most financial websites (Yahoo finance for example) show the P/E. http://finance.yahoo.com/q?s=GE Will pull up the current price for GE the P/E is shown lower right. After you look at that click on the link on the left side that reads "Key Statistics" and you will see more information related to the P/E. http://finance.yahoo.com/q/ks?s=GE+Key+Statistics

Answers are provided by students, volunteers, and random strangers. We have roughly checked them for grammar, and punctuation, not for accuracy, do not make any life threatening, or financial decisions based on this information. The questions are generated by people using search, so the most common questions are likely to appear for a term.

News Meme