Browsing All posts tagged under »P/E Ratio«

Why The Equity Market Still Looks Good Value

December 20, 2010

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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

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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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