What is good P/E ratio

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

  1. harmads

    harmads Member

    Joined:
    Sep 14, 2005
    Messages:
    236
    Likes Received:
    6
    Trophy Points:
    18
    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. ivanboesky

    ivanboesky Active Member

    Joined:
    Apr 28, 2005
    Messages:
    418
    Likes Received:
    26
    Trophy Points:
    28
    Location:
    Asia
    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.
    Check out the following link
    http://www.investopedia.com/articles/analyst/043002.asp
     
  3. gerarachna

    gerarachna New Member

    Joined:
    Jan 5, 2009
    Messages:
    1
    Likes Received:
    0
    Trophy Points:
    1
    hello,

    I want to study about basic parameters for learning basic equity
     
  4. sudoku1

    sudoku1 Well-Known Member

    Joined:
    Oct 23, 2007
    Messages:
    10,898
    Likes Received:
    17,351
    Trophy Points:
    113
    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. rvm123

    rvm123 Active Member

    Joined:
    Jan 20, 2005
    Messages:
    397
    Likes Received:
    149
    Trophy Points:
    43
    Location:
    bangalore
    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
     
    AW10 likes this.
  6. NOMINDTR

    NOMINDTR Well-Known Member

    Joined:
    Jan 5, 2008
    Messages:
    653
    Likes Received:
    273
    Trophy Points:
    63
    What is the right P/E of SATYAM as of today? :D
     

  7. rvm123

    rvm123 Active Member

    Joined:
    Jan 20, 2005
    Messages:
    397
    Likes Received:
    149
    Trophy Points:
    43
    Location:
    bangalore
    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. masterjee

    masterjee Active Member

    Joined:
    Oct 29, 2004
    Messages:
    139
    Likes Received:
    35
    Trophy Points:
    28
    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. Placebo

    Placebo Well-Known Member

    Joined:
    Dec 15, 2008
    Messages:
    256
    Likes Received:
    423
    Trophy Points:
    63
    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.
     

Share This Page