How To Use The P/E Ratio And PEG To Tell A Stock's Future

Discussion in 'School Of Stock Market' started by Meenakshi Razdan, Jun 27, 2015.

  1. Meenakshi Razdan

    Meenakshi Razdan Administrator Staff Member Moderator

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  2. priya agrawal

    priya agrawal Member

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    Price earning ratio helps in deciding what earning we can make by investing in those stocks.
     
  3. Pro2016

    Pro2016 New Member

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  4. ajay daram

    ajay daram New Member

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    PE ratio is very simple to calculate and most difficult to understand.in pe ratio we are dividing present price to past earnings.It should be used in conjunction to the other parameters lke P/B,PEG,ROE,ROCE,Sale growth rate,Debt to equity etc.say for example two stocks are there one with PE of 10 and other with PE of 50 what we we usually think is that lower PE stock is better but it is always not true because valutions must always should be seen in conjunction with growth of stock and its balance sheet strength.
     
  5. RAMA MURTHY SASTRY CHALLA

    RAMA MURTHY SASTRY CHALLA Well-Known Member

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    I like P/E Ratio very much but not as it is , i used in a different manner
    every body got his own investment style or approach
    basically P/E Ratio tells how many years of future earnings you are willing to pay to
    own a company's shares now.....
    P/E Ratio is one of the investment tool , dont use only with that , use other fundamentals also can give better performance

    In USA in 1920 majority of people used PE Ratio up to 1965 it is a popular ratio
    in UK they are not preferred PE Ratio at that time, they used Div Yield at that time ...

    after that 1980 onwards new styles and new research approaches take place in the world market

    after that " PEG " Ratio more popular in all over the world
    PEG is most powerful and successful 1980 onward

    in USA in dot com mania high PE stocks get high speed
    Ex:
    " Amrica online " stock reached a high P/E of 275
    after that next high P/E is " Yahoo " reached of 1900 level

    now in Indian stock market also high PE Ratio stocks raise in the market
    ex : MCX , TITAN , Shree Cement , Nestle Ind , Glaxo Consumer , Britania Ind like that
    but those are very good management companies no doubt in that

    and another version is also there high PE Ratio stocks normally high Growth stocks
    and another version is low PE Stocks low life and High P/E Stocks long life
    PE Ratio is age to end stock ex : 5 PE ratio life of business 5 years only
    40 P/E Ratio business may perform 40 years from now onwards

    but we are know about 2008 crash result High PE Stocks get worst effected also

    these theories are ok , but our experience , and our method will give results according to their strength

    that is only one version it may not true , but we take essence of it , only
    those are may be theories , it may not true but , we have to make our
    own style of investment method according to our risk apatite only

    investment method make it simple and effective is always Best

    ALL THE BEST P/E Ratio investors ............
     
    Last edited: Jan 15, 2017
    ajay daram likes this.
  6. ajay daram

    ajay daram New Member

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    1. When ever growth future growth disappears from high PE stocks they are likely to correct highly.
    2. we are ready to pay high PE ratios only because of one or more of the following reasons (a)their future growth prospects (B) wealth creation ability (C) competitive advantage over peers (D) Monopoly stock
    3. say for example MCX is almost a monopoly stock in that sector,shree cement got competitive advantage over its peers,Nestle got wealth creation ability etc.
     
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