Price to Earnings (#PE) ratio, also known as price multiple or earnings multiple is the ratio obtained by dividing the current share price by earnings per share (#EPS).
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Thread Threadexplaining #PE Ratio & #PEG Ratio & its use in #FundamentalAnalysis
(Must read for #FA learners)
🙏Like & RT to spread learning with all🙏
Views Welcome👉@dmuthuk @Vivek_Investor @datta_arvind @caniravkaria @FI_InvestIndia
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Price to Earnings (#PE) ratio, also known as price multiple or earnings multiple is the ratio obtained by dividing the current share price by earnings per share (#EPS).
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P/E ratio is a reflection of the market's opinion of the earnings capacity & future business prospects of a company.
Companies which enjoy high investor confidence & have a higher market standing usually command high P/E ratio.
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On the face, it would seem that companies with low P/E ratios would offer most attractive investment opportunities. This is not always true.
Companies with high current earnings but dim future prospects often have low P/E ratio.
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As an #investor your primary concern is with future prospects of a company & not so much with its present performance.
This is why companies with low current earnings but bright future prospects usually command high P/E ratio.
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Better to invest in a stock with P/E ratio of 30 having good future growth prospects rather than investing in a stock having low P/E ratio of 5 or 6 but has an uncertain or bleak future growth prospects.
But at the same time never buy companies with too high valuations.
Hence its always advisable to judge #PE ratio in conjunction with prospects of future earnings & growth of the company. This can be done using P/E ratio in conjunction with #PEG ratio.
@caniravkaria @Arpit1223 @FI_InvestIndia
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Price/Earnings to Growth (#PEG) ratio is calculated dividing company’s P/E ratio by growth rate of its earnings for a specified time period.
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PEG ratio gives a better picture about valuation of a company as compared to P/E ratio since it takes into consideration the company's earnings growth.
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In case of companies having high growth rates, their P/E ratio might be high & in such cases using just P/E ratio these high-growth companies would appear overvalued relative to others & in such cases better to use PEG ratio to get clear picture about company’s valuation.
#investor can use PEG ratio to know if a stock is overvalued or undervalued.
✅PEG ratio greater than 1 means stock is relatively expensive.
✅PEG ratio lower than 1 means stock is below its fair value.
✅PEG ratio will be negative when there is de-growth in earnings.
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Building conviction on existing portfolio stocks is complex topic. I am still learning and have only 2-3 years exp. Lot of learning is inspired from @varinder_bansal as part of omkara family, listening to old colleage @connectgurmeet on news channel and @unseenvalue posts
https://t.co/KQkupOeFzp financial statements and results on quarterly basis to evaluate whether your thesis on company is still intact through growth in revenue, profits and cash. You cannot rely only on whats app forwards or brokerage updates.
2.Quarterly Con-Calls post result covering enviornment of the sector in which company operates, future expansion plans, & companies confidence in responding to fund managers. (For eg, in my evening walks, i listen to con-calls on You tube rather than music to utilize the time.)
3. High conviction is build when you compare py qtr or py year con call scripts and see whether company giving forward statements were met in subsequent quarters or not. For eg company said they will be doing CAPEX for 100 crores in FY 2020 and then we can see current state.
4. Profits not growing qtr or qt or yr on yr is not the sign for low conviction. You need to screen the balance sheet to see if the company has taken huge R&D expenditure which they believe is right for company as they build new products for future years, then that make sense
https://t.co/KQkupOeFzp financial statements and results on quarterly basis to evaluate whether your thesis on company is still intact through growth in revenue, profits and cash. You cannot rely only on whats app forwards or brokerage updates.
2.Quarterly Con-Calls post result covering enviornment of the sector in which company operates, future expansion plans, & companies confidence in responding to fund managers. (For eg, in my evening walks, i listen to con-calls on You tube rather than music to utilize the time.)
3. High conviction is build when you compare py qtr or py year con call scripts and see whether company giving forward statements were met in subsequent quarters or not. For eg company said they will be doing CAPEX for 100 crores in FY 2020 and then we can see current state.
4. Profits not growing qtr or qt or yr on yr is not the sign for low conviction. You need to screen the balance sheet to see if the company has taken huge R&D expenditure which they believe is right for company as they build new products for future years, then that make sense
MCap is a function of market sentiments. Balance sheet, cash flows, R&D execution, talent acquisition, regulatory compliance, M&As and so on....are a function of management/governance. Never mix the business with the stock. Stock is not the business. Business is not the stock :)
It's simple, if ""FY23 PAT of this API to CDMO = FY21 PAT of largest pure-play CDMO/API"" then the FY23 Mcap of this API/CDMO= FY21 Mcap of largest pure-play CDMO/API, am I correct Sajal saab??
— richman (@greatrichman3) June 14, 2021
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So the cryptocurrency industry has basically two products, one which is relatively benign and doesn't have product market fit, and one which is malignant and does. The industry has a weird superposition of understanding this fact and (strategically?) not understanding it.
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
If everyone was holding bitcoin on the old x86 in their parents basement, we would be finding a price bottom. The problem is the risk is all pooled at a few brokerages and a network of rotten exchanges with counter party risk that makes AIG circa 2008 look like a good credit.
— Greg Wester (@gwestr) November 25, 2018
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
1/ Here’s a list of conversational frameworks I’ve picked up that have been helpful.
Please add your own.
2/ The Magic Question: "What would need to be true for you
3/ On evaluating where someone’s head is at regarding a topic they are being wishy-washy about or delaying.
“Gun to the head—what would you decide now?”
“Fast forward 6 months after your sabbatical--how would you decide: what criteria is most important to you?”
4/ Other Q’s re: decisions:
“Putting aside a list of pros/cons, what’s the *one* reason you’re doing this?” “Why is that the most important reason?”
“What’s end-game here?”
“What does success look like in a world where you pick that path?”
5/ When listening, after empathizing, and wanting to help them make their own decisions without imposing your world view:
“What would the best version of yourself do”?
Please add your own.
2/ The Magic Question: "What would need to be true for you
1/\u201cWhat would need to be true for you to\u2026.X\u201d
— Erik Torenberg (@eriktorenberg) December 4, 2018
Why is this the most powerful question you can ask when attempting to reach an agreement with another human being or organization?
A thread, co-written by @deanmbrody: https://t.co/Yo6jHbSit9
3/ On evaluating where someone’s head is at regarding a topic they are being wishy-washy about or delaying.
“Gun to the head—what would you decide now?”
“Fast forward 6 months after your sabbatical--how would you decide: what criteria is most important to you?”
4/ Other Q’s re: decisions:
“Putting aside a list of pros/cons, what’s the *one* reason you’re doing this?” “Why is that the most important reason?”
“What’s end-game here?”
“What does success look like in a world where you pick that path?”
5/ When listening, after empathizing, and wanting to help them make their own decisions without imposing your world view:
“What would the best version of yourself do”?
