Many people want to get rich overnight when they participate in the market for the first time, after all, the market is a high-risk and high-return market.
After a period of time, most people will be cut into waves and cut wave after wave, at this time very few people will settle down to learn Xi related knowledge, which is simple and complex, the most common of which is the price-earnings ratio.
By written definition, the P/E ratio is the ratio of *** divided by earnings per share.
It is calculated as P/E ratio = current stock price Earnings per share = market capitalization of the company and net profit of the company. If a certain *** is 10 yuan, and the net profit per share is 1 yuan, then PE is 10 times.
Many people think that the P/E ratio is the return on investment period, if you invest 10,000 yuan, the P/E ratio is ten times, that is to say, you can return the cost of 100,000 yuan after ten years.
Of course, this is the ideal state, the P/E ratio is dynamic, the company's operating conditions are different every year, and the P/E ratio will also fluctuate.
Of course, if you don't nitpick, there is nothing wrong with this understanding.
There are also some people who regard the P/E ratio as the valuation benchmark of the first price, and they believe that the lower the P/E ratio, the lower the value of the ** is undervalued, there is value to be invested.
On the contrary, the higher the P/E ratio, the higher the price-earnings ratio, the more it is overvalued, and there is no value for money to invest in.
This statement is not entirely true.
The price-to-earnings ratio is indeed an important reference for valuation, but it is not the only criterion.
In some industries, the P/E ratio level has never been high, such as the banking industry, where the P/E ratio level has remained in single digits all year round, and you have to say that it is underestimated, and it has been like this for so many years.
There are also some industries, the P/E ratio is generally high, such as emerging industries, high-tech enterprises, popular tracks sought after by the market, the P/E ratio is generally dozens or even hundreds of times larger, the performance growth rate of these industries is also fast, with the growth of the years, the P/E ratio will also fall.
Therefore, the P/E ratio has a certain reference significance, but it is not absolute.
First, judge the company's operating conditions.
When a listed company's P/E ratio is negative, it means that the annual earnings are negative, which means that the company is in a state of loss that year.
Under normal circumstances, such companies will not be favored too much by the market, especially for large investment** and investment institutions, and it is very difficult for such companies to enter their field of vision.
There is such a set of logic, large-scale investment ** is responsible for the customer, if a listed company's performance has been losing money year after year, then if the investment fails, how to explain it to the customer?、
Maybe you can use other logic to make the client believe in you, but most of the clients have a hard time understanding this kind of investment behavior, so it is difficult to explain it to the client.
The second is to judge the valuation level of listed companies in the entire industry.
The price-earnings ratio alone does not have much reference value, because there is no standard without comparison, and the standard of stock valuation is difficult to define for ordinary investors.
Therefore, most professional investors use the P/E ratio to make multiple comparisons, and we can use the P/E ratio of the listed company itself to compare the P/E ratio of the industry to which it belongs, so as to judge the valuation of the company.
Of course, there are some cases where the entire industry is misestimated, but after all, such a situation is not something that ordinary investors can define, so it is not a matter of fact.
In addition to comparing with industry standards, the P/E ratio can also be used to compare the current overall valuation level with the historical valuation level.
Such a comparison can determine whether the current market as a whole is overvalued or undervalued, so as to give an answer as to whether it is suitable to enter the market.
In summary, the P/E ratio is a very important parameter, but it is not absolutely correct, it depends on how to use it, which is the same as other parameter indicators, each indicator has its own optimal scenario for adaptation, and only by combining it can we make a more accurate judgment.