i am shocked to know that a school software company like Educomp which has sales of only 145 crores (3months) gets a PE of 50 on the stock market and a very high technology company like KPIT Cummins Infosystems with sales of 148 crores (3months) gets a PE of only 5.
is making software for car/aeroplanes far less complex than teaching online maths to 14 year olds ?
what on earth is this kind of valuation ?:annoyed:
hello....this source might help yr reasoning..:
a low P/E ratio does not necessarily mean that a company is undervalued.... rather, it could mean that the market believes the company is headed for trouble in the near future..... stocks that go down usually do so for a reason. it may be that a company has warned that earnings will come in lower than expected.... this wouldn't be reflected in a trailing P/E ratio until earnings are actually released, during which time the company might look undervalued..
you can get into a lot of trouble by valuing stocks using only simple indicators such as the P/E ratio.... a high P/E ratio could mean that a stock is overvalued, there is no guarantee that it will come back down anytime soon.... on the flip side, even if a stock is undervalued, it could take years for the market to value it in the proper way.
Security analysis requires a great deal more than understanding a few ratios. While the P/E is one part of the puzzle, it's definitely not a crystal ball...
a better interpretation of the P/E ratio is to see it as a reflection of the market's optimism concerning a firm's growth prospects....
The P/E ratio is a much better indicator of a stock's value than the market price alone....
In general, it's difficult to say whether a particular P/E is high or low without taking into account growth rates and the industry....
P/E ratios are generally lower during times of high inflation..
There are many explanations as to why a company has a low P/E....
regards
harsh
