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Can someone explain how to use P/E ratio and EPS ?
Posted on 12/12/19 at 6:57 pm
Posted on 12/12/19 at 6:57 pm
I try to use them when evaluating stocks, but I have no idea if I’m doing it right. I mainly look to see that EPS is generally trending upward. If EPS is low, I check to see if it’s because of the acquisition of another company.
6
Posted on 12/12/19 at 7:01 pm to C3W
P/E and EPS are ratios so I'm not entirely sure what question you're asking. I would start with these resources:
Resources:
Investopedia
Used Corporate Finance books on Amazon
Youtube
You can pick up the DeMarzo Corp Fin textbook used on Amazon super cheap
Resources:
Investopedia
Used Corporate Finance books on Amazon
Youtube
You can pick up the DeMarzo Corp Fin textbook used on Amazon super cheap
Posted on 12/12/19 at 11:14 pm to C3W
Not to throw a wrench in your learning but look at P/S. Price to sales can’t be manipulated by accounting gimmicks and stock buybacks.
EPS can mislead you if a company buys back 5% of their float but the reinvest $0 in capex/future growth the quarter looks great (random numbers of course). However, all they’ve done is reduce the number of shares, increasing EPS, and therefore decreasing P/E, but really doing nothing but multiple expansion.
It’s much harder to fudge sales figures.
EPS can mislead you if a company buys back 5% of their float but the reinvest $0 in capex/future growth the quarter looks great (random numbers of course). However, all they’ve done is reduce the number of shares, increasing EPS, and therefore decreasing P/E, but really doing nothing but multiple expansion.
It’s much harder to fudge sales figures.
Posted on 12/13/19 at 4:15 am to C3W
Taking a big step back.
P/E is not just misleading but not always a relevant valuation metric.
For example, banks are more about price to tangible book value.
Other hard asset cyclicals are more about EV/EVITDA.
And yet over highly cyclicals are about price to net asset value (ie liquidation value).
Just be careful.
P/E is not just misleading but not always a relevant valuation metric.
For example, banks are more about price to tangible book value.
Other hard asset cyclicals are more about EV/EVITDA.
And yet over highly cyclicals are about price to net asset value (ie liquidation value).
Just be careful.
Posted on 12/13/19 at 4:32 pm to C3W
like others said P/E isn't a great metric. Growth companies specifically the tech industry are often gonna have negative earnings.
You need to look at the 10k and use a few others to get a bigger picture.
EPS isn't always great either. A buyback can inflate those numbers in the short term.
You need to look at the 10k and use a few others to get a bigger picture.
EPS isn't always great either. A buyback can inflate those numbers in the short term.
Posted on 12/19/19 at 8:32 am to C3W
As far as I know - the higher P/E ratio - the bigger expected revenue but at the same time very risky stock shares - they can easily drop (of fly high).
Posted on 12/19/19 at 8:40 am to book32
i prefer it not be negative...
primarily since it scares other investors
primarily since it scares other investors
Posted on 12/19/19 at 10:46 am to mrgreenpants
Wouldn’t P/S leave out profit margin?
Posted on 12/19/19 at 11:20 am to C3W
Funny this should get bumped. Just saw this...
Yay for multiple expansion!
Yay for multiple expansion!
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