A tool for Fundamental Analysis

[PGDIMES]

hi if stock a has pe of 3 and stock b has pe of 4; in financial terms which stock's PE is higher a or b

I always thought the higher the number the higher the PE but the below phrase in a book confused me

A 14-year study of stocks
between 1957 and 1971, testing the efficient market hypothesis, revealed that
with consistency, lower-PE stocks out-performed higher-PE stocks. The study
included all stocks listed on the New York Stock Exchange (NYSE). Results
showed an average annual rate of return in six groupings:
6lowest PE 16.3%
5 13.6%
4 11.7%
3 9.3%
2 9.5%
1highest PE 9.3%

Putting these results another way, if an investor had placed $1 million in the
lowest PE stock group at the beginning of the period, it would have grown to
$8,282,000. The same amount invested in the highest-PE group would have
grown to only $3,473,000

pl can you advise?

thanks

chetan

PE is not a good indicator of stock's value these days.Divide PE by growth (PEG) to determine the value of the stock in comparison to its peers. Moreover to analyse a stock fundamentally you have to dig deeper.:thumb:

 

[booze007]

@PGdimps

please let us know how you valuvate stocks .if possible step by step .
it would be gr8 for beginners like me .thank u

 

[PGDIMES]

How can get daily open interest data .

nse bhavcopy from nseindia.com

 

[mohnnn]

Dear PG dimes

NSE Bhavcopy provides data .. I agree

Mohan

 

[PGDIMES]

@Pgdimes

please let us know how you valuvate stocks .if possible step by step .
it would be gr8 for beginners like me .thank u

If you are looking for short term profit rather than long term capital gain then go for technical analysis rather than fundamental analysis. FA is generally suitable for investors (though TA might help at times) with a long time horizon.FA takes a lot of time as one has to completely comprehend a lot of things whereas TA try to predict the market based on charts and hence is fast and can be easily understood. If you really want to understand FA go through the book Corporate Finance by Ross, Westerfield and Jaffe (Publisher-TMH, Indian Print-Rs.500).

 

[dinesh26]

Joining the discussion the calculation of a correct buy price and sell price is critical in investment sucess. Going by the 10 year history of the company and return calculation is essential for Buffet style of stock picks.
I stumbled upon a website which offers the 10year X Ray of most listed companies in India , their 10 year ROE. PE,Salesetc. The site also has a buy price calculator and sell price calculator based on these parameters.The site also sends buy and sell alerts in your email on the scrips at prices selected by you.

For a small fee this is a good tool for fundamental analysis. I am using their services for the past 3months with good results.It eliminates confusion instock selection and is good for long term investors. please try and leave your comments.
Moneyworks4me.com
http://www.moneyworks4me.com/

Happy investing

 

[murthymsr]

hi if stock a has pe of 3 and stock b has pe of 4; in financial terms which stock's PE is higher a or b

I always thought the higher the number the higher the PE but the below phrase in a book confused me

A 14-year study of stocks
between 1957 and 1971, testing the efficient market hypothesis, revealed that
with consistency, lower-PE stocks out-performed higher-PE stocks. The study
included all stocks listed on the New York Stock Exchange (NYSE). Results
showed an average annual rate of return in six groupings:
6lowest PE 16.3%
5 13.6%
4 11.7%
3 9.3%
2 9.5%
1highest PE 9.3%

Putting these results another way, if an investor had placed $1 million in the
lowest PE stock group at the beginning of the period, it would have grown to
$8,282,000. The same amount invested in the highest-PE group would have
grown to only $3,473,000

pl can you advise?

thanks

chetan

PE is an indicator which studies the Price moments in comparison to Earnings.

It can be expressed as the RATIO Price per share / Earnings per share, as in the first example.

It can also be expressed as a PERCENTAGE. (100*EPS/Price), as in the second example.

The second way of presentation is less popular and hence this confusion.

I my be corrected, If I am wrong.

murthymsr

 

[ankitpatel84]

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[imayam007]

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[ppmatkari]

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