(This article is compiled by the public account Yuesheng Investment Consulting (yslcw927)) for reference only and does not constitute operational advice. If you operate by yourself, please pay attention to position control and take risks at your own risk. )
The price-to-earnings ratio is an important indicator for measuring the level of stock prices and corporate profitability. The price-to-earnings ratio of stocks in the same industry can be regarded as the level of investment value and used as a reference. Most and stocks with a high price-to-earnings ratio are popular stocks, while and stocks with a low price-to-earnings ratio may be unpopular stocks. However, because the size of the stock market has a certain relationship, the active P/E ratio will be higher for small stocks, and relatively lower for large stocks, which is also normal.
1. The concept of price-earnings ratio:
Price earnings ratio (P/E ratio) is also called "price-to-earnings ratio", "stock price-to-earnings ratio" or "price-to-earnings ratio (referred to as price-to-earnings ratio)". The price-to-earnings ratio is one of the most commonly used indicators to evaluate whether the stock price level is reasonable. It is calculated by dividing the stock price by the annual earnings per share (EPS) (the same result can be obtained by dividing the company's market capitalization by the annual profit attributable to shareholders). When calculating, the stock price usually takes the latest closing price, and in terms of EPS, if it is calculated based on the published EPS of the previous year, it is called the historical P/E; the EPS estimate used to calculate the estimated P/E ratio generally uses the market average. Consensus estimates are the average or median estimate obtained by collecting the forecasts of multiple analysts by an organization that tracks a company's performance. There are no certain guidelines for what a reasonable price-to-earnings ratio is.
2. Derivation of price-to-earnings ratio:
Price-to-earnings ratio = market price per share of common stock/annual earnings per share of common stock
Intrinsic value of stock P = next period dividend D/( necessary yield k - dividend growth rate g)
next period dividend D =Earnings per share for the current period Ex(1+g)xDividend payout rate b
Derivation: P/E=b(1+g)/k-g
From the above formula, it can be seen that the price-earnings ratio is directly proportional to the dividend growth rate. , inversely proportional to the required rate of return required by investors.
3. Price-earning ratio indicator analysis steps:
1. Analysis and research. The price-to-earnings ratio is only one of the indicators for studying stocks;
2, changes in the price-to-earnings ratio. Sometimes, you will find differences in the P/E ratios provided by different channels. This is because the price per share used is different, which can be the closing price of the day, the closing price of the quarter, the average price and the estimated future price;
3, usage method. The price-to-earnings ratio is one of the measures used to evaluate the market performance of listed companies. The key is to compare the stock's P/E ratio to stocks in the market as a whole and to stocks in the same industry. Usually, if the price-to-earnings ratio is high, the stock price is high; otherwise, the stock price is low;
4, the reasons for low price-to-earnings ratio. A too low price-to-earnings ratio usually means that the company's performance is growing slowly;
5, the reason for a high price-to-earnings ratio. Companies with high P/E ratios are usually high-growth, low-profit companies, including many high-tech companies;
6, industry comparison. Comparing the price-to-earnings ratios of stocks in the same industry is a very effective method of analysis. You can see which stocks are considered by the market to be the leaders in their industries, and you may also find stocks that are undervalued.
4. The relationship between P/E ratio and industry:
As can be seen from the above table, the P/E ratio of industries such as medicine, retail, and software is much higher than that of other industries, while the P/E ratio of industries such as aviation, automobiles, and financial services is lower than Average. This shows that industries such as medicine, retail, and software are at a high level of development and are sunrise growth industries. A high price-to-earnings ratio means that the future development speed will be more obvious. Industries such as aviation, automobiles, and finance are mature non-cyclical industries, and their industry growth rates are slow. This illustrates the relationship between price-earnings ratio and industry distribution.
5. Use the price-to-earnings ratio to analyze the value of stock investment and make investment decisions. The following points can be referred to:
1. The price-to-earnings ratios in bull markets and bear markets are different;
The price-to-earnings ratios in bull markets can be relatively high, while in bear markets it is just the opposite. This is why In a bull market, the P/E ratio is so high that there are still people buying it, but in a bear market, there is a reason why no one is interested even if the P/E ratio is around 10 times.
2. From the perspective of Chinese and foreign stock markets, the price-earnings ratio of mature markets is lower, while the price-earnings ratio of emerging markets that are growing rapidly is higher;
3. In the long term, the price-earnings ratios of listed companies in different industries maintain different levels. Sunrise industries ( Such as high-tech industries) and blue-chip stocks with high growth potential have higher P/E ratios, while sunset industries have lower P/E ratios.
In short, comprehensive analysis of the growth potential and price-earnings ratio of listed companies are important tools for discovering the investment value of individual stocks.
6. What should you pay attention to before using the price-earnings ratio?
What we buy a company is its future, so when using the price-earnings ratio, we must pay attention to three points (the first two points are important)
First, the company belongs to a sunset industry. It is still a rising industry.
If this is a sunset industry, this may be stuck forever.
Second, what is the company's future profitability and growth?
The price-to-earnings ratio represents the current value, and the growth represents the future value. Buying a stock is buying the future of this company. For example, the price-earning ratio of both companies is 8 times, but one is in the steel industry, and the other is Dongfang Yuhong (a company that produces waterproof material ). The former market has become saturated, and steel is a homogeneous competition. Reached the ceiling. The latter is different. The waterproof materials produced by Dongfang Yuhong have a large market space across the country, and the industry is highly concentrated, and it is an industry with differentiated competition. You said that at this time, the company also has a price-to-earnings ratio of 8 times. Who should you consider??
Third, think about the price-to-earnings ratio of 2.0. It is still a way to control risks. (Optional)
Buffett had a price-to-earnings ratio of 5 times when he bought PetroChina. At that time, his dividend rate was 45%, so his "price-to-earnings ratio of 2.0" was only a little over 10. At that time, PetroChina was still in a rising stage, and its performance was rising steadily, which made it cheaper for him to buy. When he sold, PetroChina's price-to-earnings ratio had reached 15. If we did not consider the dividend rate, there would be no It felt too big, but if the dividend rate was taken into account, his price-to-earnings ratio suddenly became more than 30, and PetroChina's performance was no longer growing at this time, so Buffett sold decisively.
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