P/E ratio is the ratio of share price to earnings per share. The price-earnings ratio widely discussed in the market usually refers to the static price-earnings ratio, which is usually used as an indicator to compare whether stocks with different prices are overvalued or undervalued. It is not always accurate to measure the texture of a company's stock with price-earnings ratio. It is generally believed that if the price-earnings ratio of a company's stock is too high, then the price of the stock is in a bubble and its value is overvalued. When a company grows rapidly and its future performance is promising, when comparing the investment value of different stocks with P/E ratio, these stocks must belong to the same industry, because the company's earnings per share are close and the comparison is effective.
P/E ratio is a valuable indicator of the stock market. On the one hand, investors often don't think that the profit figures calculated in strict accordance with accounting standards truly reflect the profitability of the company on the basis of going concern. Therefore, analysts often adjust the company's official net profit by themselves.
Many people think that the lower the P/E ratio, the cheaper the stock, the safer the stock and the better the future earnings. Whether this view is applicable to A shares is easy to verify by doing some quantitative analysis. My analysis method is to rank more than 2,000 A-shares according to PE from small to large. The smaller the PE, the higher the score. According to the ranking order, it is divided into 10 ranking segments, and each ranking segment has about 200 stocks. Then, the annualized income of each stock ranking segment is calculated (assuming that the stocks are equally weighted in the ranking segment), and then the income of each ranking segment is compared. The interval of back measurement starts at 20 1 1 on August 3rd and ends at 20 16 on August 3rd. Re-rank all stocks every 20 trading days and adjust the stocks in the ranking section.
In the following figure, the right-most 90- 100 stock PE is the cheapest stock, and the left-most 0- 10 stock PE is the largest or simply negative, which is the most speculative stock. The leftmost red column is the annualized income of Shanghai and Shenzhen 300 in recent five years, and the blue column is the annualized income of PE market segments in recent five years. Comparing the returns of the blue column, we can see that the stock with the smallest PE is not the best, and the stock with the best returns is the stock with 80-90 points, that is, the stock with smaller PE but not the smallest. And PE's biggest stock return is the worst. (Careful friends will observe that the gains of all stock sectors exceed the gains of the Hong Kong, Shanghai and Shenzhen 300. This is because the income of large-cap stocks in the past five years is far less than that of small-cap stocks. )
So a simple conclusion is that we should avoid the stocks with the highest PE, but buying the stocks with the lowest PE can't bring us particularly good returns.
However, if we limit our investment to CSI 300, we will see a completely different picture.
Segment income of Shanghai and Shenzhen 300 P/E ratio and P/B ratio
I divided the Shanghai and Shenzhen 300 into 10 segments according to the PE ranking, with about 30 stocks in each segment. In the following figure, the PE of the leftmost segment of 90- 100 is the smallest, and the PE of the rightmost segment of 0- 10 is the largest.
Comparison of annualized income of PE plate of Shanghai and Shenzhen 300 constituent stocks in recent five years. We can see that the stock with the smallest PE in Shanghai and Shenzhen 300 (the rightmost segment) has the highest yield, while the segment with the highest PE has the lowest yield, which has been negative for nearly four years. This really confirms the view that the lower the P/E ratio, the more valuable the investment. More than 300 stocks in Shanghai and Shenzhen are mature stocks. For mature stocks, it is more reliable to use fundamental indicators such as PE when selecting stocks. The final conclusion is that investors should avoid PE stocks with the highest or negative profits. Investing in Shanghai and Shenzhen 300, choosing stocks with small PE will get better returns, while investing in ordinary A shares, the stocks with the smallest PE are not necessarily the most advantageous.
Pay attention to the price-earnings ratio in stock trading, because the price-earnings ratio is a prediction of the future of the stock, and it is the most effective and direct reflection of whether there is room for speculation and whether there is a bubble in the current situation of this company; At the same time, it can also be used as a valuable indicator of the company's future expectations and whether it is worth investing.
According to the regulations, the price-earnings ratio of 20 times is a reasonable parameter. If the price-earnings ratio of the stock is higher than 20 times, it is said that the valuation is too high and it is not worth investing for fear of a bubble. The price-earnings ratio of stocks less than 20 times is underestimated, which proves that this ticket has the potential to explode in the future and there is room for speculation; Although this indicator is not a hard indicator reference, it is still of reference value;
The simplest and clearest thing is to look at the price-earnings ratio (static) to see the current valuation, and the price-earnings ratio (dynamic) to see the future valuation. The stock market is a speculation about the future, so the price-earnings ratio (dynamic) is very worthy of reference!
Let's take a look at the P/E ratio of the major indexes: the average P/E ratio of the main board Shanghai Composite Index is 15.05 times. Through the valuation forecast, the main board has been underestimated and has the value of speculation, which means that A shares are not far from the next bull market.
The P/E ratio of the three average indexes in Shenzhen Stock Exchange is 27. 15 times, which is overvalued and has a downside risk.
The average price-earnings ratio of Shenzhen main board is 18.79 times, which is within the normal range and there is room for speculation in the later period;
The average price-earnings ratio of small and medium-sized board is 3 1.94 times. Although the valuation of small and medium-sized board is higher than that of the main board, it is still more than twice as high as that of the main board, and the downside risk is still very small.
The average P/E ratio of GEM is 4 1.84 times, and there are still overvaluations and bubbles. Similarly, the valuation of GEM is relatively high, and it is reasonable to fall back to about 30 times. Judging from the valuation, it is predicted that there is still room for growth enterprise market to fall, and it is necessary to return to a reasonable valuation to have room for speculation!
Understanding the law of stock market fluctuation has always been a challenging world-class problem that puzzles people. So far, no theory and method can be convincing and stand the test of time. At present, there are three kinds of stock investment analysis methods: basic analysis, technical analysis and evolution analysis.
Among them, the basic analysis takes the intrinsic value of the enterprise as the main research object, and forms corresponding investment suggestions from the aspects of determining the enterprise value, the macroeconomic situation affecting the stock price, the development prospect of the industry, and the operation status of the enterprise. Technical analysis takes the intuitive behavior of stock price rise and fall as the main research object, starting with the K-line chart and technical indicators of stock price change. The popular technical analysis methods are Dow theory and wave theory. Evolutionary analysis focuses on the intrinsic properties of life movement of stock market fluctuation, and dynamically tracks the direction and space of market fluctuation.
P/E ratio, like P/B ratio, P/E ratio and discounted cash flow, is one of the most common reference indicators for basic analysis of the stock market. Generally speaking, the price-earnings ratio is:
However, it should be noted that there are some inherent defects in the P/E ratio used to measure whether the average price of the stock market is reasonable, such as the defects of the calculation method itself, the instability of the index itself, the earnings per share is only one influencing factor of the stock investment value, and there are many other factors.
To sum up, the P/E ratio is widely concerned by investors because of its own advantages, but don't blindly believe it. We must make a comprehensive analysis. The stock market is risky, so you need to be cautious in investing!