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

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

 

The P/E ratio is one of the most commonly used ratios in Fundamental Analysis, and if you use it in your investing, you need to know the pros and cons of using it.
Please refer : https://www.investarindia.com/blog/all-about-the-pe-ratio

 

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.

 

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 ............

 

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.

 

PE ratio is a good valuation tool if you are using it correctly (apple to apple comparison). However, it ignores the company’s growth rate. That's why while evaluating growth companies, PEG ratio is a good option. Also read-- No-Nonsense way to use PE Ratio.

 

Price earning ratio is the ratio between a company's share price and earnings per share. It gives an idea of what the market is willing to pay for company's earnings.