Eps,pe

What does it mean whne a stock has high EPS and low PE and vice versa,,

PE (Price to earnings ratio ) is dependent on the EPS(Earning per share) and prevailing price of the stock.
PE = Price of stock/EPS.
EPS is independent of price. So a high EPS does not mean anything.

A low PE stocks generaly means stocks below 10 PE. A stock may have a low PE for various reasons. Either it is not a high growth stock or investors are not confident about its management or it is in a highly cyclical business.
You will observe that Banks, Metal stocks generally have low PEs. This is because they are in cyclical business.
IT, Capital good companies have high PEs because they are in high growth sectors.

Hi rj , thanx for ur reply,
so is it a gud idea to pick stocks wit low PE in a gud performing sector.

can u also tel me how OI , Put/call ratios shd be taken into account while valuating equity options !!!

xpecting ur reply ..

RD

That shd give u some hints ... low PE does not necessarily mean good value , and often u will find that within a sector (say IT) scrips with a high PE are better picks than those with v low PEs.

One cant generalise in this matter, and each case will have its own merits

AGILENT