Learn with ETMarkets: How to read valuations parameters

While Price multiples are good to use, it can sometimes be misleading as earnings per share isn’t always reliable and it is difficult to compare companies in two different sectors. For instance, an investor cannot assign the same value for Metal and FMCG stocks. Metal as we all know is highly cyclical and more vulnerable to economic conditions. On the other hand, FMCG business is much less vulnerable to economic cycles. Hence, it would be justified to assign a higher multiple to FMCG stocks as compared to Metals.