P/E ratio is the ratio of share price to net profit per share. P/B ratio is the ratio of share price to net assets per share. Generally speaking, the higher the P/E ratio and P/B ratio, the higher the stock valuation. Conversely, the lower the P/E ratio and P/B ratio, the lower the valuation of the stock. Of course, this is only a superficial understanding of P/E ratio and P/B ratio. In any case, when valuing stocks with P/E ratio and P/B ratio, the general meaning is the same.

Then, when valuing stocks, which index can truly reflect the valuation of stocks?

Look at the price-earnings ratio first. As the ratio of share price to net interest rate per share, P/E ratio has another meaning, that is, according to the current share price and profit, how many years will it take to recover the investment only by profit after buying stocks. For example, if the P/E ratio is 10, it will take 10 years to recover the investment with the interest rate. Of course, the investment recovery mentioned here is only theoretical, and it is difficult to do it in practice. Because if you want to turn theory into reality, the conditions you need are harsh and difficult to achieve. But in any case, it is more reasonable to use the price-earnings ratio to value the stock.

Because investors buy stocks to invest in a company, from the perspective of value investment, the way for investors to get a return on investment from a company is that the company can create profits and get dividends from it. The P/E ratio only reflects the relationship between the cost that investors pay to invest in a company and how much return they can get. However, it is unreasonable to use the price-earnings ratio to value stocks. Because when calculating the price-earnings ratio, you need to use the net interest rate per share, and a company's current valuation is bound to depend on its future net profit, which is obviously uncertain, and you can only estimate it at most. This means that the price-earnings ratio we calculate is not necessarily the true price-earnings ratio of a stock. Therefore, when the stock is valued by P/E ratio, if the expected net profit of the company deviates from the real net profit, the valuation will also deviate.

Then look at the price-to-book ratio. The price-to-book ratio represents how many times the cost of purchasing a company's net assets. For example, the P/B ratio is 2, that is, it costs 2 yuan to buy 1 yuan of net assets. Net assets are assets after deducting liabilities from total assets and belong to the company's own assets. If a company is liquidated on the spot, net assets are the investment that investors can recover. Therefore, the smaller the P/B ratio, the less the cost of buying the net assets of the unit, and the lower the stock valuation.

Compared with P/E ratio, the authenticity of price-to-book ratio stock valuation may be lower. Because the price-to-book ratio only considers the net assets of the current stock, but does not consider the impact of changes in profits on the net value. If future profits increase, net assets will also increase, and the valuation of stocks will also increase. On the contrary, if the company continues to lose money, its net assets will lose money sooner or later, and the valuation of the stock will continue to decline. Moreover, compared with net profit, net assets are also easier to inject water. For example, some companies buy another company at a high price, forming a high goodwill, but if the acquired company is not well managed, it may face the impairment of goodwill, resulting in a sharp decrease in the company's net assets in a short period of time. For this reason, the P/E ratio is still used more when valuing stocks. . . .

How to analyze stocks with P/E ratio?

What kind of price-earnings ratio is a good price-earnings ratio?

This question is very difficult. Let's think backwards and see if those are bad P/E ratios. For example, some ST-name stocks are about to be delisted, so the P/E ratio of these stocks is definitely not good. We can see what kind of price-earnings ratio is bad by observing the price-earnings ratio of these companies. The P/E ratio of ST shares is mostly negative, because the profit is a loss and negative, so the P/E ratio is negative. However, there are also those with a particularly large P/E ratio, because the profit is very small, so the price-performance ratio is very high. Therefore, it is meaningless to simply compare the price-earnings ratio, but some rules can be summarized through observation.

(1) P/E ratio cannot be negative, and a negative value indicates the company's loss. Long-term investment is not advisable.

(2) Price/P/E ratio = earnings per share. Earnings per share cannot be too small. Too small means that the profitability of the company's stock is too poor. The reference value of earnings per share is greater than the price-earnings ratio, which can be used for horizontal comparison between companies.

(3) It is meaningless to compare the P/E ratios of different companies, only it is meaningful to compare the P/E ratios of the same company in different time periods. Or compare two companies in the same industry.

What's the price-to-book ratio?

P/B ratio is the ratio of market value to total physical assets. For example, the auction discount of all assets of a company is 1000 billion yuan, the market value of the company is 1000 billion, and the price-to-book ratio is equal to1000 =10; The price-to-book ratio can indirectly reflect the heat of the market. For example, both of them sell milk tea, both of which are brands with the same formula. People prefer to spend 20 yuan at A's house rather than spend 15 yuan at B's house, which shows that A's popularity and reputation are better.

How to analyze stocks with P/B ratio?

Similarly, we find the law through observation, arrange the P/B ratio from large to small, compare the largest P/B ratio with the smallest, and see what the stock with the largest P/B ratio is like. It can be seen that there are many ST shares with the maximum and minimum price-to-book ratios, so the price-to-book ratio is not as big as possible, nor is it as small as possible. But there are also some rules.

(1) P/B ratio cannot be negative. The negative P/B ratio indicates that the company is in poor operating condition and still owes foreign debts after selling assets.

(2) The P/B ratio should not be too large. Too large means that the ratio of market value to assets is too high, or the stock price has been speculated very high, and there is a big bubble. Either the company's assets are too small and there is no capital. Just like the value of a commodity is only 1 yuan, and now it is sold at the sky-high price of 1000 yuan, which means that it may collapse instantly if it is heated for only a short time.

(3) The price-to-book ratio reflects the heat of the market. The comparison of P/B ratio between different industries is of little significance, but the comparison between the same industries is meaningful. For example, the price-to-book ratio of Maotai in liquor industry is 15.8 1, and Wuliangye is 10. 1. It shows that the heat of Maotai is higher. People are willing to pay a higher price for an equal cup of Maotai and Wuliangye.

(4) Stocks with a P/B ratio of 0- 1 are not popular and valued by people due to insufficient market power. For example, a car is worth 0.2 million/200 thousand, no one cares, no one bids, and people are only willing to spend 65438+ 10 thousand to buy it.

(5) The stocks whose P/E ratio is between 1- 10 are in a prosperous period of development, and people are relatively optimistic about their development.

(6) The P/E ratio exceeds 10, or even higher, indicating that the price has far exceeded the value. According to Buffett's concept of price and value investment, if the price exceeds the value too high, the space and speed of stock price rise will slow down and the risk of bubble bursting will increase.

P/E ratio and P/B ratio are important indicators of stock selection. P/E ratio mainly reflects the profitability of listed companies, while P/B ratio reflects the overall level of the company, but they have different guiding significance in application methods:

1. For value investors, the P/B ratio is more important. Because if the net profit of listed companies is negative, then the P/E ratio is negative, which has no guiding significance at this time. P/B ratio refers to the ratio of market value to net assets, and net assets represent shareholders' equity.

2. For short-term investors, the P/E ratio is more important. Because after the stock price becomes higher, the P/E ratio will be higher, and the probability of callback will increase in the short to medium term.

3. When analyzing industry, manufacturing, steel and coal, heavy assets enterprises and cyclical industries, the P/B ratio is more important. If the P/E ratio is less than 1, which is often said to break the net value, these heavy assets enterprises are relatively difficult to go bankrupt, so the probability of being underestimated is high.

4. It is better to analyze the price-earnings ratio of consumer industry, liquor, medical care and technology industry. Because these industries have broad development prospects, the investment cost can be recovered quickly.