Ask Colin

What source do you use for PE ratios and do you use historical or prospective data?

I tend to use the Australian Financial Review for PE ratios. I will check ones that look wrong with the Aspect Financial website, or the company's website, where I can find the EPS in their annual report. I only ever use historical PE ratios, because I distrust all forecasts. Ben Graham always made the point that we could not estimate the future very well and the best course was to look for a track record and assume that it could be repeated. That philosophy underpinned the whole of his 'margin of safety' concept.

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