2. P/E ratio is one of the most commonly used indicators to evaluate whether the stock price level is reasonable. Divide the stock price by the annual earnings per share (the market value of the company divided by the annual profits attributable to shareholders can also get the same result).
3.PE is one of the most common reference indicators for basic analysis of stock investment, just like P/B ratio, P/B ratio and discounted cash flow.
Basic meaning
P/E ratio (PE or P/E ratio for short) refers to the ratio of stock price to earnings per share in a survey period (usually 12 months). Investors usually use this ratio to estimate the investment value of a stock, or use this indicator to compare the stocks of different companies. "Price-earnings ratio" refers to the price-earnings ratio; "Price per share" refers to the share price per share; "Earnings per share" refers to earnings per share. That is, the ratio (P/E) between the stock price and the after-tax profit per share of the stock in the previous year is a dynamic indicator to measure the investment value of the stock.
Dynamic price-earnings ratio = static price-earnings ratio /( 1+ compound annual growth rate) n (n power)
Dynamic P/E ratio is a comprehensive consideration of the P/E ratio level of the target enterprise and the future profit growth. Dynamic P/E ratio refers to the P/E ratio of the forecast profit for the next year that has not yet been realized. Among them, the compound annual growth rate represents the comprehensive growth level of listed companies and needs to be evaluated by various indicators; N is the number of years to evaluate the average compound growth rate of listed companies, and the general institutional forecast is calculated as 3 years.
Dynamic P/E ratio is generally much smaller than static P/E ratio, which represents a dynamic change of performance growth or development.
Dividend yield
Listed companies usually distribute part of their profits to shareholders as dividends. Divide the dividend per share of the previous year by the current share price, which is the current dividend rate. If the stock price is 50 yuan, and the dividend per share is 5 yuan last year, the dividend yield is 10%, which is generally high, reflecting that the P/E ratio is low and the stock value is undervalued.
Generally speaking, the price-earnings ratio is:
0-13-that is, the value is undervalued.
14-20-that is, normal level.
21-28-that is, the value is overvalued.
28+- reflects the speculative bubble in the stock market.
The dividend yield of stocks with extremely high P/E ratio (such as more than 100 times) is zero. Because when the P/E ratio is greater than 100 times, it means that it will take investors more than 100 years to recover their capital, and the stock value is overvalued, so they don't pay dividends.
Edit the calculation method of this paragraph
PE (price-earnings ratio) is the ratio of a company's share price to its earnings per share. The calculation formula is as follows:
P/E ratio = price per share/earnings per share
The price-earnings ratio is attached to the daily stock market statements of several major securities newspapers and periodicals, and its calculation method is as follows:
P/E ratio = closing price per share/after-tax profit per share in the previous year.
If the company's total share capital increases due to bonus shares, capitalization of reserve fund and share allotment, its after-tax profit per share shall be diluted accordingly according to the changed total share capital.
Take Dongda Apai as an example. In 1998, the after-tax profit per share of the company was 0.60 yuan. In April, 10 shares were converted into 3 shares, and the closing price on June 30 was 43.00 yuan, so the P/E ratio was
43/0.60× (1+0.3) = 93.17 (times) The company's industry position, market prospect and financial situation.
To price stocks with price-earnings ratio, we need to introduce a "standard price-earnings ratio" for comparison-the price-earnings ratio converted from bank interest rates. After the seventh interest rate cut in June 1999, the current one-year time deposit interest rate in China is 2.25%, that is, the investment 100 yuan, and the annual income is 2.25 yuan, calculated according to the price-earnings ratio formula:
100/2.25 (income) =44.44 (times)
If the stock purchase is purely for dividends, the dividend income and interest income have the same meaning under the condition that the company's performance remains unchanged. For investors, whether to deposit money in the bank or buy stocks depends first on whose investment yield is high. Therefore, when the stock price-earnings ratio is lower than the standard price-earnings ratio converted from the bank interest rate, the funds will be used to buy stocks, otherwise the funds will flow to bank deposits, which is the simplest and most intuitive price-earnings ratio pricing analysis.