Today I'm researching P/E ratio, which according to investorpedia is:
market value per share/earnings per share
it usually takes the last 4 quarters into account and is susceptible to accounting manipulations.
It shows how much investors are willing to pay per $ of earnings; it is most valuable comparing earnings within industry groups. ( it make sense to me that each industry has different profit ranges and different earnings per share.)
So, here are my companies:
google: 35.44
perini 10.92
teradyne 28.62
pacific digital 9.85
wells fargo 12.27
gr.wolf resorts N/A
I had not been aware of the psychological aspect of price/earnings ratio! But here it is again - if many many investors think you a have great stock and are willing to buy, you have a nice plump ratio - of course earnings must be good. So that must mean that in years where a co. invests a lot, which may bring earnings down, and people keep your stock...let's see then it's high!
So if you don;t have high earnings and people still buy or hold your stock the P/E ratio looks good; If you however have high earnings, but nobody gives a damn, they don't buy or actually sell (maybe because they think you can't keep going up) then your P/E ration is low.
so google is either high expected growth or high expectations
teradyne: revenue: 1.1 B, gross profit 660M, approx 4 M shares
(quarterly growth-1%, quart. earnings growth 54%!)
possible growth stock
pacific digital: only 9.85; fair value, no hype around it now
perini same
great wolf: N/A could mean P/E is negative; they have been building 3 Lodges with Water parks
yepp: 22% revue growth, -5% profit
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earnings per share is profit/shares; so 10 m/1m =1, 10m/100,000= 10
hmmm, same profit divided by more shares is less than that profit divided by more.....
Saturday, March 1, 2008
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