# What is good P/E ratio

Discussion in 'Fundamental Analysis' started by harmads, Nov 11, 2005.

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Hi all

We all hear about P/E ratios and EPS etc being talked about. But I would appreciate if an expert on the subject would tell us what is a good P/E ratio to consider. How do you differentiate by studying P/E ratios between a good share and a not so good one.

Regards

2. ### ivanboeskyActive Member

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The PE ratio should be compared to the expected growth in the companys revenues or profits. If this ratio is less than 1, its a great buy. If its around one, its a good buy. If the PE to growth ratio is higher than 2, you would want to take a serious look at whether you want to buy the stock.
http://www.investopedia.com/articles/analyst/043002.asp

3. ### gerarachnaNew Member

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hello,

I want to study about basic parameters for learning basic equity

4. ### sudoku1Well-Known Member

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i m not an xpert on this one ,but time shows that PE ratios do not command much imp xcept for indices......so it is advisable 2 track index PE rather than going in for stock specific ratios

5. ### rvm123Active Member

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p/e ratio is nothing but market price of a share divided by earnings per share. hence the company having lesser p/e ratio is a better one than a company having a higher p/e ratio. previously it was little difficult to find a company having less than 5 p/e. but now-a-days a lot of companies are having p/e ratio around 2 or 3. we may consider them as low priced. we can take the average p/e ratio of any industry and compare it with the p/e ratio of a company, to have a good judgement about the company

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6. ### NOMINDTRWell-Known Member

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What is the right P/E of SATYAM as of today?

7. ### rvm123Active Member

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there is nothing called a good p/e ratio for any of the scrip. the main use of p/e ratio is to compare any company with another. whichever company has a lesser p/e ratio, it is considered to be underpriced. further during market boom, a p/e ratio of even 5 may be considered good. whereas during bearphase (like now), even a p/e ratio of 1 or 2 may be considered good. Hence there is no concept or no constant p/e ratio which can be considered as good

8. ### masterjeeActive Member

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PE ratios per se do not indicate anything they can remain elevated or depressed for extended periods of time. changes in peoples perception (teji or mandi) will obviously make them change.
PE ratios are also related to growth rate of company sometimes measured by PEG

anyway the good old marwari notion teji or mandi is all you need. it is all round you. if you are looking to buy as it seems from your query waiting is also a part of the game.

regards

m

9. ### PlaceboWell-Known Member

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PE ratio are never good or bad they are nothing but indicators of your Break Even.

PE RATIO = Market Price Per Share / Earnings Per Share

Market Price Per Share = Market Cap (Equity ) / Number of Outstanding Shares

EPS = Profit After Tax / Number of Shares Outstanding

so PE = Equity / PAT

this will give the number of years it will take an investor to break even.

I personally do not rely on PE ratios or base any decision looking at them

In my opinion PE ratios should only be looked at when two companies are getting into either a merger or an acquisition.