When we open the stock trading software, we will find three P/E ratios, namely static P/E ratio, dynamic P/E ratio and TTM P/E ratio (rolling P/E ratio). What do they mean? You can click on the marked "?" to get the corresponding explanation.

Dynamic price-to-earnings ratio: total market value divided by estimated full-year net profit.

Static P/E ratio: the total market value divided by the net profit of the previous year.

Rolling P/E ratio: the total market value divided by the net profit of the last 4 quarters.

Assume that the net profit in the first quarter of 2018 is 100 million, the net profit in the second quarter is 120 million, the net profit in the third quarter is 140 million, and the net profit in the fourth quarter is 160 million; the net profit in the first quarter of 2019 is 180 million. At the same time, assuming that the total market value of the stock is 5 billion yuan, the different price-to-earnings ratios are:

Dynamic price-to-earnings ratio = 5 billion/(180 million * 4) = 6.94 times. Among them, only this year's net profit is used to estimate the full-year net profit. For example, the profits for two quarters in 2019 were announced, which were 180 million and 200 million respectively. Then the dynamic price-to-earnings ratio is 5 billion/[(180 million + 200 million)*2 ].

Static P/E ratio = 5 billion/(100 million + 120 million + 140 million + 160 million) = 9.615 times.

Rolling price-to-earnings ratio = 5 billion/(120 million + 140 million + 160 million + 180 million) = 8.33 times.

In the past, trading software generally did not have three price-to-earnings ratios. There was usually only one, which refers to the dynamic price-to-earnings ratio. Only the net profit announced this year was used to estimate the full-year net profit. But later, in order for investors to more intuitively see the operating results of the company and the volatility of revenue, many software currently launch three price-earnings ratios.

For ordinary investors, the price-to-earnings ratio is only a reference indicator for stock buying and selling, not an absolute indicator. Therefore, don't pay too much attention to the classification of price-earnings ratio. Generally, you only need to know the dynamic price-earnings ratio. For technical speculators, it is not even necessary to look at the price-to-earnings ratio.

Also, a low price-to-earnings ratio does not necessarily mean that the stock price is cheap and the dividends are high. It is only a reference indicator. For example, if a company that has been losing money for many years suddenly sells off its assets and turns losses into profits, its price-to-earnings ratio may suddenly soar to several times. In terms of dividends, some stocks have very low price-to-earnings ratios, several times or more, but they do not pay cash dividends or dividends. The proportion is very low, such as joint-stock banks (non-state-owned banks).

Therefore, when looking at the price-to-earnings ratio of a stock, you should refer to the price-to-book ratio, as well as financial statements and recent trends. Don't think that a low price-to-earnings ratio means it is worth investing.