Steady Compounding All big things come from small beginnings Excerpts: Figuring out a company’s intrinsic value with PE ratio The price-earnings (P/E) multiple has been one of the most popular tool analysts use to value stocks. A company trading at 10x P/E implies that investors are willing to pay 10 times the net income that was generated. In other words for every $1 in net income generated, investors are willing to pay $10 or a 10% earnings yield. Despite its popularity, it remains one of the most misunderstood metric. A share valued at 30x P/E may not be expensive relative to another stock trading at 15x PE. Likewise, a share trading at lower P/E today, when compared to its 10-year median P/E, does not imply that it is a bargain.
Focus on total returns, not income investing
Focus on total returns, not income investing
Focus on total returns, not income investing
Steady Compounding All big things come from small beginnings Excerpts: Figuring out a company’s intrinsic value with PE ratio The price-earnings (P/E) multiple has been one of the most popular tool analysts use to value stocks. A company trading at 10x P/E implies that investors are willing to pay 10 times the net income that was generated. In other words for every $1 in net income generated, investors are willing to pay $10 or a 10% earnings yield. Despite its popularity, it remains one of the most misunderstood metric. A share valued at 30x P/E may not be expensive relative to another stock trading at 15x PE. Likewise, a share trading at lower P/E today, when compared to its 10-year median P/E, does not imply that it is a bargain.