Regarding PE Ratio

#1
Dear Friends

I have some questions regarding PE Ratio...

1. PE Ratio is Market Price divided by Earning per Share.... So does PE ratio change daily?... And how to calculate the EPS.. what i think is... EPS might get changed quarterly...Need some information from you guys....

have a nice day
JBest
 

AW10

Well-Known Member
#2
1) Yes.. PE Ratio changes every day.. cause market price change every day.
2) EPS data you can get from companys financial results. Be careful about the which EPS you are going to use.. is it quarterly EPS or annualised EPS.
If you are considering quarterly EPS then yes, they can be found from quarterly results of companies. else us Annual report to get annualised EPS.

Happy Trading.
 
#3
dear AW10

thanks for the reply... one more please...

As per my knowledge... results are declared quarterly.. so we will get
EPS 4 times a year... then PE ratio will remain constant for a quarter...

then how come PE Ratio change for NIFTY on daily basis?

Have a nice day
JBest
 

AW10

Well-Known Member
#4
EPS will remain same for the quarter. Earning / #of shares issued by the company.
It is indicator of company's performance.

PE ratio is Mkt price / EPS.. Though EPS remains same but Mkt price changes every second. Hence PE ratio will change every second.
It indicates how stock mkt players are pricing the company's performance. There are lot of other factors that affect daily price in the market..Infact, short traders care least about such fundamental based ratio..

Happy Trading
 
#5
........
There are lot of other factors that affect daily price in the market..Infact, short traders care least about such fundamental based ratio..
.........

Happy Trading
Dear AW10,

By this you mean Fundamental factors? If yes which can you elaborate them?

Have a nice day
JBest
 

AW10

Well-Known Member
#6
In my view, these are not fundamental factors but the reaction to fundamental news, current market sentiments, sector sentiments, global clue, greed and fear amoung market participants, fund flow from FII and also from retail investors..

Fundamental factor may decide long term direction.. but I don't use them for trading.
In my view.. we all are dead in long term.. so we need to think in terms of defined time period. And in today's dynamic market condition, rule of game has inclined away for age old method of "buy, hold and forget" way of investment. We have to more agile in adjusting ourselve. 1 Qtr of delay in getting new info from quarterly report is far too long period. Our investment could have gone down a lot when PE ratio starts looking more and more healthy to buy.

We can't drive a car by looking in rear view mirror (unfortunately, thats what classic fundamental analysis focuses on).

These are just my views and belief (once upon a time I was into fundamentals but now primarily a technical trader). Many may not believe cause our financial education of busines schools / info flow from mutual funds markting etc does not suppor this. Happy to discuss them, if required.

Happy Trading.
 

Similar threads