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PE ratio = Market price/ earnings per share. PE ratio is useful for comparison with its competitiors. Hence peer PE ratio to gauge whether the particular counter is over-valued or not. PE ratio can be based on historical earnings or projected earnings. Based on the latter, it helps to gauge the potential increase in price assuming the PE ratio is constant for a particular industry. PE ratio on its own is not much of a use.
Another tool for value investing is the Market Price/ Book Value (NAV). If it's above 1, it means the investors place a premium on the share. If below 1, the share is traded at a discount to its book value. Again, the key here is to make a peer comparison.
if i may be so bold, in applying my rusty ACCA knowledge i kinda disagree with elf on this
PE ratio refers to the co share price divide by the co previous year earnings. in your example u equate it to paying $1000 or something worth $200. some pple might mistake it to mean that the co's worth is measured only by its previous year's earnings.
the co's worth also includes the NAV and its future earnings discounted to present value rite? this why looking a looking at the co's order books for the next fews years is helpful.
To stay one step ahead .... buy before the crowd. When they start buy like mad, just relax and watch the price go up! Shiok!
Hi,
TA and FA are useful tools. FA helps to select which stocks to buy while TA helps to time the entry and exit. TA is about mass psychology and higher probabilities of winning and never about certainties.
So my strategy is to use both tools to complement each other :-)
The market would be a boring place without the speculators. We need speculators to drive up the price after we have bought the shares right ? Haha!
heh heh. pikachu, that's why FA has the EPS (or PE) ratio. I mean, imagine it, if a co has a PE ratio of 5x, what that means is that if the co's actual value is 20c, you pay $1 for it. Now the qn is, would you in real life pay $1000 for something htat's only worth $200?
so to me, the 80c extra is sentiment. which is why, i trust TA more, personally.
student....hm...sometimes, 'normal' behaviour kills.. haha. i mean, if i were to extend the metaphor from ipunter (where's he, btw...), if the stock market is a beast, then investors must necessarily take one of two positions: hunter, or hunted. To be the latter requires only herd mentality. But of course, we can't always stay on the sidelines. hehe. join in, yes, but gotta know when to cash out, accord to your risk appetite. :) good luck to all vested!
For the sake of debate - so what does it say for FA if logic doesn't prevail and as what newmoon says, a company with large debt gets a large increase in stock price! :)
Yep I agree.... looks too irrational to make sense already.... if dun have spare cash to burn better stay by the sidelines
When there's money to be made, people everywhere will join the bandwagon, so as not to miss out on good opportunities which may never come again in a long, long while. I would ike to think it's not madness, but just normal behaviour.
Agree... its all in the mind of the investors. Crowds are irrational and move according to sentiment.
Do not stand in the way of crowds or you will be crushed to death.This trend will go on for some time-maybe STI3200
Even ACMA(a company with enormous debt) can double in price from 4 cents to 9 cents