18 votes
Accepted

Why was S&P 500 PE Ratio so high on May 2009

Asking why the p/e was so high is best answered "because reported earnings were so low". Recall that the S&P500 bottomed in early March 2009 when the panic of the financial crisis reached ...
not-nick's user avatar
  • 6,418
8 votes

Where can I find historical P/E ratios for companies?

The mathematics site, WolframAlpha, provides such data. Here is a link to historic p/e data for Apple. You can chart other companies simply by typing "p/e code" into the search box. For example, "p/...
not-nick's user avatar
  • 6,418
7 votes
Accepted

Discrepancy in P/E ratio of stocks in Robinhood app?

The EPS of Amazon for the last quarter of 2018 was $6.05. However, the P/E ratio is calculated using an annual number for earnings. Amazon’s earnings for 2018 was $20.14. (Source) $1673 / $20.14 = 83....
Ben Miller's user avatar
  • 116k
5 votes

Is the PE ratio a good indicator of when to move money in and out of the stock market?

Great question - one could write an entire book answering it. The P/E ratio is a reasonable (I don't agree with the subjective term "good") indicator of whether a particular company is over or ...
rocketman's user avatar
  • 907
5 votes
Accepted

Does the P/E ratio of REITs matter for dividend investing?

Real Estate Investment Trusts (REITs) are required by law (at least in the U.S.) to maintain a dividend payout ratio of at least 90%. In other words, they are required to pay out at least 90% of ...
Ben Miller's user avatar
  • 116k
5 votes

The rule of thumb that if the growth of a company is 20% per year, then the P/E should be 20, what is this rule based on?

Companies with stable, positive earnings that are not expected to grow are not worthless. 0% growth does not imply 0 P/E.
Charles Fox's user avatar
  • 2,779
4 votes

Does the P/E ratio of REITs matter for dividend investing?

I believe the accepted answer is at best misleading, and at worst entirely incorrect. The P/E ratio is based on EPS, but for REITs, EPS is not very meaningful since it includes depreciation, which is ...
public wireless's user avatar
4 votes

For a very stable listed company, does the P/E ratio represent how many years the buyer can stand to earn his/her investment back?

This would be for example a company with a share price of $90 and profits of $10 in the last year. If the company paid out all its profits as dividends, and the company made the exact same profits ...
gnasher729's user avatar
4 votes
Accepted

Understanding corporate earnings manipulation

Imagine that I run Justin's Lawnmowing Inc. In the first year of operation I make $1,000. I spend $100 on gas and other consumables to run my lawnmowers. I also spend $1,200 on a new lawnmower for ...
Justin Cave's user avatar
  • 27.3k
4 votes

The rule of thumb that if the growth of a company is 20% per year, then the P/E should be 20, what is this rule based on?

I'm not sure I agree with the implication, but I believe he is saying that if EPS grows by 40%, and you find that the current price of the stock has a P/E ratio of 40, then that is "okay and ...
Louis Waweru's user avatar
3 votes

For a very stable listed company, does the P/E ratio represent how many years the buyer can stand to earn his/her investment back?

Sort of, but not really. The measure just represents its share price divided by earnings per share for a relevant period such as the last financial year. It says nothing about future periods.
Lawrence's user avatar
  • 9,362
3 votes

Price Earnings Ratio

The P/E ratio is a measure of historic (the previous financial year) earnings against the current share price. If the P/E is high, this means that the market perceives a big increase in future ...
not-nick's user avatar
  • 6,418
3 votes
Accepted

The Intelligent Investor: Northern Pacific Railway example

Without reading the source, from your description it seems that the author believes that this particular company was undervalued in the marketplace. It seems that investors were blinded by a small ...
Grade 'Eh' Bacon's user avatar
3 votes
Accepted

Charles Schwab shows Ebay's PE as 21. Is that a mistake or a different way of calculating?

The numbers you use to get ~$10B annual "earnings" appear to be revenue, not earnings. (Earnings are revenue minus expenses.)
nanoman's user avatar
  • 29.7k
3 votes
Accepted

Is it possible to identify the number of years to double the return on investment considering earnings growth

No, it is not possible because the current price and earnings do not have such a direct causal relationship with the ROI for you as an investor in that company. Certainly it is true that a company ...
JohnFx's user avatar
  • 53k
2 votes
Accepted

Is dividend included in EPS

EPS is often earnings/diluted shares. That is counting shares as if all convertible securities (employee stock options for example) were converted. Looking at page 3 of Q4 2015 Reissued Earnings Press ...
Shannon Severance's user avatar
2 votes

Is dividend included in EPS

Not quite. The EPS is noted as ttm, which means trailing twelve months --- so the earnings are taken from known values over the previous year. The number you quote as the dividend is actually the ...
Peter K.'s user avatar
  • 3,943
2 votes
Accepted

What should I look for when looking for stocks that are 'on-sale'?

It might seem like the PE ratio is very useful, but it's actually pretty useless as a measure used to make buy or sell decisions, and taken largely on its own, pretty useless becomes utterly and ...
Michael's user avatar
  • 701
2 votes
Accepted

Is Peter Lynch talking about the Dividend Adjusted PEG Ratio in this quote?

Essentially, yes, Peter Lynch is talking about the PEG Ratio. The Price/Earnings to Growth (PEG) Ratio is where you take the p/e ratio and then divide that by the growth rate (which should include ...
Ben Miller's user avatar
  • 116k
2 votes

How to calculate stock price with EPS and outstanding shares

To answer your question: You can’t. Earnings per share (the metric EPS) is not directly correlated to stock price. EPS is a metric which is often used for benchmarking a stocks performance relative ...
ssn's user avatar
  • 1,466
2 votes

For a very stable listed company, does the P/E ratio represent how many years the buyer can stand to earn his/her investment back?

Imagine, as in some of the other answers, a company whose stock sells for $90 and whose earnings this year were $10. The resultant P/E is 9. As has been stated, if the company pays out all of the $10 ...
chili555's user avatar
  • 1,667
2 votes

Understanding corporate earnings manipulation

To stay in your example, say your company buys a printer for $800. It exchanges $800 for an object that is worth $800 so actually no money was lost. You could theoretically sell the printer and get ...
Daniel's user avatar
  • 5,316
2 votes

Studying for basic finance exam and stuck finding the stock value

There is insufficient information given. Beta is of no help. EPS would help if we knew the P/E ratio of the company, but we don't. Expected return is insuficiently specified. Expected return on ...
Klas Lindbäck's user avatar
2 votes
Accepted

Why do PEG ratio values calculated on different financial web sites differ from each other?

There are two inputs to the PEG ratio calculation: The P/E ratio, and the growth rate. Each of these inputs can be calculated in a variety of ways. The P/E ratio, for instance, can use either trailing ...
Chris W. Rea's user avatar
  • 31.7k
2 votes
Accepted

Trailing or forward earnings to calculate SP500?

The answer depends on what the future price for the Index will be used for. Trailing Earnings, or Trailing P/E is used as a consistent and quite reliable metric for Index performance relative to its ...
Jorge O-L's user avatar
2 votes

For a very stable listed company, does the P/E ratio represent how many years the buyer can stand to earn his/her investment back?

No. You're forgetting abound "compound interest". Since the company is not growing, it presumably pays out all earnings as dividends. As a shareholder, you could reinvest those by buying more shares.
MSalters's user avatar
  • 2,745
2 votes

What is the correlation (if any) between earnings report and stock price movement?

The market is forward looking and share price tracks company earnings, thought not in a straight line linear correlation that you suggest. If a company reports earnings significantly higher than ...
Bob Baerker's user avatar
  • 76.4k
2 votes

The rule of thumb that if the growth of a company is 20% per year, then the P/E should be 20, what is this rule based on?

Fundamentally, the investor must decide how many years to look forward. A company is often valued at some-number-of-years times the current earnings. But, for example, the company has $1 in earnings ...
S Spring's user avatar
  • 3,572
2 votes

Metal companies trading below book value

Price to book value (market cap/Book value) is actually a metric of: PE x ROE which is equal to : (price/earnings) x (earnings / equity) where equity = net book value (asset-libailbities) ...
Avaricious_vulture's user avatar
2 votes

Calculating a company's PE value

Assuming: nothing at the company changes the two current owners are 50/50 partners the $45k net earnings is distributed to the owners each year Buying 1% of the company for $10,000 puts a million ...
quid's user avatar
  • 49k

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