Browsing All posts tagged under »P/E Ratio«

Why The Equity Market Still Looks Good Value

December 20, 2010


An regularly quoted measure in order to estimate whether or not the equity market represents good value is the price/earnings ratio (ie. the price of the overall stock market relative to the current year’s forecast earnings). ┬áThis makes sense given that shareholders are paying for the stream of earnings that the companies in the index […]

The Failings of the P/E Ratio

August 31, 2010


Arguably the simplest of all the equity valuation methodologies, the P/E ratio is also a metric with a large number of shortcomings. In the basic sense, the P/E ratio is attractive to investors because it is easy to apply (no detailed cash flow forecasts or estimates of the cost of capital are required) and is […]


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