the so-called price-earnings ratio is a ratio in accounting and finance, which is obtained by dividing the stock price by the earnings per share. Or, to put it simply, this ratio is equal to the current period. If the price-earnings ratio of a stock is 2 times, it means that investors have to hold the stock for about 2 years before they have a chance to fully return their capital (assuming the earnings per share remain unchanged here). If the earnings per share growth is ideal, the return period of holding the stock will be shortened; Naturally, the shorter the return period, the better.
since the price-earnings ratio of a stock is equal to the return period of the stock, the lower the price-earnings ratio, the shorter the return period, so the lower the price-earnings ratio, the better.
P/E ratio can be divided into historical P/E ratio and expected P/E ratio. The average person's P/E ratio is the historical P/E ratio, which is calculated by dividing the current price of the relevant stock by the latest earnings per share. However, under the premise that buying a stock should buy its prospects, investors should consider the expected price-earnings ratio of the stock. The expected price-earnings ratio is calculated by using the expected earnings per share; However, the expected P/E ratio is only a reference data, because each securities bank or fund has different evaluations on the forecast earnings per share. As for which expected P/E ratio is more credible, we can judge by the forecast track record of the relevant securities bank or fund.
Undoubtedly, the P/E ratio can help investors measure the investment value of individual stocks simply and quickly. But it doesn't seem to be the best way to decide whether the stock is worth buying just by multiple of P/E ratio. When picking stocks with P/E ratio, you'd better pay attention to the following four points:
(1) Stock price trend: If the earnings per share in the past remain unchanged, the upward trend of stock price will directly increase the P/E ratio. In other words, the price-earnings ratio is related to the supply and demand of stock prices. During the bull market in 1997, China Everbright Holdings, under artificial speculation, had a price-earnings ratio of more than 1, times, that is, it would take more than 1, years to pay back the current period. The stock price increase can be described as decoupled from its basic factors, and the risk of chasing or holding the stock can be imagined.
(2) the growth trend of earnings per share: understanding the benefits of earnings per share growth in the past is to clearly understand the company's operating performance. If earnings per share are volatile, sometimes it is good and sometimes it is bad, even if the company's latest earnings per share record good results, the past P/E ratio is lowered, but it does not mean that its P/E ratio can be maintained at a low level.
(3) It is advisable to compare the P/E ratio with similar stocks first: the return rate and investment risk of different industries are different, so the reasonable P/E ratio of various stocks is also different. Take high-quality infrastructure stocks and highway stocks as examples. If it is not in a bear market, the price-earnings ratio of these stocks should be ten times or more, because their investment risk is extremely low.
(4) It is advisable to consider the atmosphere of the big market first: during the big bull market, stocks with a price-earnings ratio of 2 to 3 times were also sought after by many people, because there were too many market funds, and investors often bought stocks regardless of their basic factors. On the contrary, in a bear market, even if the price-earnings ratio is less than 1 times, the stock may not attract investors to buy it, because the price-earnings ratio is low, or it is related to the stock price crash. The so-called price-earnings ratio is a ratio in accounting and finance, which is obtained by dividing the stock price by the earnings per share. Or, to put it simply, this ratio is equal to the current period. If the price-earnings ratio of a stock is 2 times, it means that investors have to hold the stock for about 2 years before they have a chance to fully return their capital (assuming the earnings per share remain unchanged here). If the earnings per share growth is ideal, the return period of holding the stock will be shortened; Naturally, the shorter the return period, the better.
since the price-earnings ratio of a stock is equal to the return period of the stock, the lower the price-earnings ratio, the shorter the return period, so the lower the price-earnings ratio, the better.
P/E ratio can be divided into historical P/E ratio and expected P/E ratio. The average person's P/E ratio is the historical P/E ratio, which is calculated by dividing the current price of the relevant stock by the latest earnings per share. However, under the premise that buying a stock should buy its prospects, investors should consider the expected price-earnings ratio of the stock. The expected price-earnings ratio is calculated by using the expected earnings per share; However, the expected P/E ratio is only a reference data, because each securities bank or fund has different evaluations on the forecast earnings per share. As for which expected P/E ratio is more credible, we can judge by the forecast track record of the relevant securities bank or fund.
Undoubtedly, the P/E ratio can help investors measure the investment value of individual stocks simply and quickly. But it doesn't seem to be the best way to decide whether the stock is worth buying just by multiple of P/E ratio. When picking stocks with P/E ratio, you'd better pay attention to the following four points:
(1) Stock price trend: If the earnings per share in the past remain unchanged, the upward trend of stock price will directly increase the P/E ratio. In other words, the price-earnings ratio is related to the supply and demand of stock prices. During the bull market in 1997, China Everbright Holdings, under artificial speculation, had a price-earnings ratio of more than 1, times, that is, it would take more than 1, years to pay back the current period. The stock price increase can be described as decoupled from its basic factors, and the risk of chasing or holding the stock can be imagined.
(2) the growth trend of earnings per share: understanding the benefits of earnings per share growth in the past is to clearly understand the company's operating performance. If earnings per share are volatile, sometimes it is good and sometimes it is bad, even if the company's latest earnings per share record good results, the past P/E ratio is lowered, but it does not mean that its P/E ratio can be maintained at a low level.
(3) It is advisable to compare the P/E ratio with similar stocks first: the return rate and investment risk of different industries are different, so the reasonable P/E ratio of various stocks is also different. Take high-quality infrastructure stocks and highway stocks as examples. If it is not in a bear market, the price-earnings ratio of these stocks should be ten times or more, because their investment risk is extremely low.
(4) It is advisable to consider the atmosphere of the big market first: during the big bull market, stocks with a price-earnings ratio of 2 to 3 times were also sought after by many people, because there were too many market funds, and investors often bought stocks regardless of their basic factors. On the contrary, in a bear market, even if the price-earnings ratio is less than 1 times, the stock may not attract investors to buy it, because the price-earnings ratio is low, or it is related to the stock price crash. ,