PE=P/E= company market value/company profit.

The market value of a company is the total value of its shares, which can be regarded as how much the current market thinks the company is worth.

If the total stock value of the company is 1 100 million and the company's annual net profit (e) is 1 100 million, then the price-earnings ratio of this company is10/=10 times. To put it simply, it will take 10 years to buy this company for 10 billion, but if you predict that the annual profit of the company will actually reach 300 million in the future and think that it is worthwhile to spend 3 billion now, then the current P/E ratio is 30/ 1=30 times.

In addition, even the same index, in different periods, the standards of overestimation and underestimation are different. So is there a unified standard to measure whether the current index is undervalued or overvalued? Of course, this is the historical percentile.

(2) Historical percentile of valuation The historical percentile of PE indicates how much lower PE is in history than the current PE. Sort the historical P/E ratio from small to large, and then look at the current PE position. The smaller this value, the lower the current valuation of the index.

How much is this value underestimated? You can refer to my percentile table corresponding to the valuation level. In fact, 30% is generally the cut-off point, and an index with a PE percentile below 30% can be considered to be in a low valuation range. In the low valuation range, you can consider buying more and investing more. When the valuation is normal, you can continue to hold or invest less, and when the valuation is too high, you can sell it in batches.

(3)PE indicators are only applicable to industries with good liquidity and stable profits: stocks with poor liquidity and small capital fluctuations will cause stock prices to skyrocket and plummet, thus affecting PE.

Industries with unstable profits will have a "low price-earnings ratio trap";

A, the declining industry P/E ratio seems to be not high, which is caused by the decrease of profit E;

B. Profits of cyclical industries (such as securities industry, etc.). ) will skyrocket with the arrival of the cyclical boom, resulting in a low price-earnings ratio, but it will be different after the boom;

C, in the high-speed growth period, most of the profits are used for reinvestment, which is artificially adjusted, so PE is inaccurate;

D. Loss-making enterprises can't talk about price-earnings ratio without profit.

2. P/B ratio (PB)PB=P/B= company market value/company net assets The smaller the better, the higher the investment value, because the amount of net assets is determined by the company's operating conditions. The better the general company's operating performance, the faster the asset appreciation, the higher the net assets and the smaller the PB.

The price-to-book ratio is also compared with its own historical data, and is also measured by historical percentile. The smaller the PB percentile, the better.

Industries and indexes with cyclical or unstable profits, such as securities, aviation and energy, which are not suitable for PE, can be measured by PB. In addition, in special periods, such as short-term economic crisis, industries with stable profits or broad-based index funds will have unstable profits in a short time. At this time, PB can also be used to assist the valuation.

The use of PB must ensure that the company's asset value is stable, intangible assets are few, and there is no increase or loss of liabilities, because the asset value is too easy to increase or decrease with time, which will affect the calculation of net assets, intangible assets are difficult to measure, and the increase or loss of liabilities will reduce net assets, thus reducing the reference value of PB.

3. Return on net assets (ROE)ROE= net profit/net assets A listed company has a net asset of 654.38+0 billion and an annual net profit of 654.38+0 billion, so its ROE is 654.38+00%. ROE indicates how much net profit can be brought by unit net assets, which is the core index used by enterprises to calculate the return on internal investment. The higher the company's return on net assets, the higher the net profit per unit of net assets, which means the higher the operating efficiency and profitability of the company's assets. Similarly, the higher the ROE of the index, the stronger the profitability of the index. In general, if the ROE of the index can be kept above 15% all the year round, then the performance of the index is better.

4. dividend rate dividend rate = dividend/market value dividend rate is one of the important yardsticks to measure whether an enterprise has investment value. On the one hand, you can choose income-oriented stocks according to the dividend yield. For example, the annual dividend yield of a stock has exceeded 1 year bank deposit rate for many years in a row, which can basically be regarded as an income-earning stock with investment value. The higher the dividend yield, the more attractive it is. On the other hand, if the dividends of the two companies are the same, the higher the dividend yield means the lower the stock price, so the higher the dividend yield, the more likely the stock price is undervalued, so the higher the better.