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How to put P/E ratios in context ... Once we start opening the Excel spreadsheet, things can get a little bit dicey for us, retail investors, Patrick. ... There's no single line or set of formulas ...
The price earnings ratio (P/E) of each identified peer company can be calculated as long as they are profitable. The P/E is calculated as: P/E = Current stock price / (Net profit / Weighted average number of shares) Particular attention is paid to companies with P/E ratios substantially higher or lower than the peer group.
Stock A is trading at a forward P/E of 15 and expected to grow at 20%. Stock B is trading at a forward P/E of 30 and expected to grow at 25%. The PEG ratio for Stock A is 75% (15/20) and for Stock B is 120% (30/25). According to the PEG ratio, Stock A is a better purchase because it has a lower PEG ratio, or in other words, its future earnings ...
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The cyclically adjusted price-to-earnings ratio, commonly known as CAPE, [1] Shiller P/E, or P/E 10 ratio, [2] is a stock valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings ( moving average ), adjusted for inflation. [ 3 ]
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Robert Shiller's plot of the S&P composite real price–earnings ratio and interest rates (1871–2012), from Irrational Exuberance, 2d ed. [1] In the preface to this edition, Shiller warns that "the stock market has not come down to historical levels: the price–earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average
= P/E base for a no-growth company g {\displaystyle g} = reasonably expected 7 to 10 Year Growth Rate of EPS 4.4 {\displaystyle 4.4} = the average yield of AAA corporate bonds in 1962 (Graham did not specify the duration of the bonds, though it has been asserted that he used 20 year AAA bonds as his benchmark for this variable [ 5 ] )