Ask Colin

PE RATIO

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  1. How is Earnings per Share used in stock selection?
  2. How can I tell which PE ratios from different sources are correct?
  3. Where do I find the PE ratio for a sector?
  4. You suggest looking for stocks with a low PE ratio. Yet William O’Neil and Stan Weinstein both warn against buying low PE ratio stocks because they could be weak-inferior stocks. How can we be more certain of good value?
  5. Even if they had a PE ratio, would it really matter, since the price of a speculative share is based on emotions rather than logic?
  6. Many companies do not have P/E ratios. Why is this?
  7. There are many PE ratios published. Which is the best one to use?
  8. In the current low interest rate environment (2015) are you still using 1.5% the bond rate to calculate the PE ratio for your fundamental analysis scans?
  9. Am I correct in using Sector average PE ratios?
  10. How do you convert a ratio to a yield in your Margin of Safety table? 
  11. Why are PE Ratios different in different sources?
  12. What are your rules of thumb for PE ratios?
  13. Weinstein specifies that Price/Dividend ratios of 14 to 17% (grossed up dividend yields of 5.88-7.14%) show uncommon bargains, whereas 26-30 (3.33-3.85%) show danger. Can these be applied to Australia?
  14. Why is there no price earnings ratio (PER) for some companies?
  15. How up-to-date are the price earnings (PE) ratio numbers in the Australian Financial Review and elsewhere?
  16. I fail to see any relationship between the PE ratio and the performance of a share. How can it help a trader make better decisions?
  17. I fail to see any relationship between the PE ratio and the performance of a company. What do you think?
  18. If a company has a Price Earnings Ratio (PER) which is higher or lower than the average PER for its industry sector, what might it indicate?
  19. What does the price/earnings ratio (PER) indicate?
  20. What source do you use for PE ratios and do you use historical or prospective data?
  21. Would it worry you if a PE ratio was negative?
  22. You look for a PE multiple less than 10 for a value stock. Would it worry you if the multiple was as low as 1.5?
  23. What PE ratios do you see as unreasonable for value and growth stocks?
  24. It is reported (end June start of July 2003) that Wall Street Experts have a bullish consensus, which is bearish, but PE ratios are high. How can that be?
  25. How is a "low" PE ratio and a "high" dividend yield defined?
  26. Where can I find a reliable PE ratio for a stock?
  27. The PE ratio is often said to be the number of times you pay for earnings. But you cannot spend earnings. Wouldn't price to dividend be better?
  28. How do you define the Earnings in the Price-Earnings (PE) ratio?
  29. Should PE ratio filter rules for blue chip stocks be set higher to allow for greater institutional demand?
  30. Instead of comparing the PE ratio to EPS growth to assess a growth company could I simply compare the PE ratio to EPS?
  31. Where can I get PE ratio data consistent with Shares magazine's series?
  32. Why does Ian Huntley say PE ratio and EPS growth should ideally be the same, when they rarely are?
  33. How do I set up the Insight Trader Systems Module to find your value model stocks?
  34. Is the PEG ratio better than the PE ratio in your approach?
  35. Where can I source the historical PE ratio and dividend yield for individual stocks?
  36. Where do I get the data to update the monthly PE and Dividend Yield data file I downloaded from your website?
  37. I was thinking about a comment during the weekend seminar regarding the lower dividend yields in the last few years being due to the market pricing in the franking benefits. Does this mean that the average PE's may have risen by a commensurate amount over the same period because the shares are trading at a higher price?
  38. How can I create a chart from the Insight Trader data files on the Data Files page of the free website?
  39. You have recently emphasized towards more defensive stocks in view of the market conditions. You have mentioned P/E's and dividend yield as specific criteria to use. Do you use historical or prospective numbers?
  40. What is the formula for calculating the Price Earnings Ratio?
  41. A friend gave up dairy farming to invest in shares, buying low PE and high dividend yield stocks. I also bought some, but my choices did not perform. Will your seminar tell me what I was doing wrong?
  42. How is a share is actually priced? What does it mean if I read that xyz share is trading above its current valuation or that it is not cheap on a PE basis?