Can anyone give me a brief exlplanation of a P/E ratio in layman terms and what Im looking for when examing it? I understand that it is Price Per Share over Annual Earnings per share but what does that tell me?
Thanks!
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Can anyone give me a brief exlplanation of a P/E ratio in layman terms and what Im looking for when examing it? I understand that it is Price Per Share over Annual Earnings per share but what does that tell me?
price of the stock divided by the EPS, it is referenced as a multiple usually companies trading at a "multiple" of 13-20 times earnings is fair but it is hard to judge on a company by company basis. You would have to look at the industry as a whole and compare. Furthermore, I wouldnt trust these EPS that are coming out since MTM got suspended; this ratio of stock analyzing is worthless IMO.
price of the stock divided by the EPS, it is referenced as a multiple usually companies trading at a "multiple" of 13-20 times earnings is fair but it is hard to judge on a company by company basis. You would have to look at the industry as a whole and compare. Furthermore, I wouldnt trust these EPS that are coming out since MTM got suspended; this ratio of stock analyzing is worthless IMO.
I would agree. P/E is a current arnings snapshot and stocks usually trade on future prospects (in other words, their powered by BULLSHIT)
best thing for traders is to learn to use charts and look for classic patterns. it's kind of "eye of newt and frogs toe, which way's the market going to go?" alchemy BUT it's worked pretty well for me the last almost 40 years.
this ratio of stock analyzing is worthless IMO.
I would agree. P/E is a current arnings snapshot and stocks usually trade on future prospects (in other words, their powered by BULLSHIT)
best thing for traders is to learn to use charts and look for classic patterns. it's kind of "eye of newt and frogs toe, which way's the market going to go?" alchemy BUT it's worked pretty well for me the last almost 40 years.
P/E Ratio tells you how much your paying for a stock, if it's expensive or cheap.
A high P/E indicates a expensive stock relative to earnings.
It's a bit tricky, some sectors have consistently high P/E like tech, and some sectors have consistently low P/E, you need to know the P/E of the sector.
The theory is that because earnings drives the market stocks with low P/E have good earnings and a low price to buy are cheap and should be good buys, it doesn't allows work that way.
P/E Ratio tells you how much your paying for a stock, if it's expensive or cheap.
A high P/E indicates a expensive stock relative to earnings.
It's a bit tricky, some sectors have consistently high P/E like tech, and some sectors have consistently low P/E, you need to know the P/E of the sector.
The theory is that because earnings drives the market stocks with low P/E have good earnings and a low price to buy are cheap and should be good buys, it doesn't allows work that way.
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