Ask Colin

Why is there no price earnings ratio (PER) for some companies?

There are two kinds of PER:

 

1. Historical
2. Estimated

 

If a company makes a loss, it will have no PER because E is less than zero (some people calculate negative PER, but that is a nonsense)

 

If a company is going to make another loss in the next year, then it will not have an estimated PER either.

 

However, if a company is estimated to make a profit next year, then it should have an estimated PER.

 

There are a few ways to work out a PER. Sometimes there is a large abnormal profit item, but a loss before abnormals. In this case the company would not have a historical PER.

 

To find the situation on any one company, you need to do some research and also understand which PER definition is used by the database you are using. eg Aspect Huntley uses a PER that is half historical and half estimated.

 

If you do not have access to a database like Aspect Huntley (my brokers website provides it), go to the ASX website and look at the company results.

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