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Published on 2019-04-15 08:15:22 Share it web version
                                    What is the price-earnings ratio is reasonable?
                                        Today, a friend asked me about the application of P/E ratio. Is the price-earnings ratio as low as possible, and the higher the worse?

I believe that the vast majority of people must have a bias in understanding the price-earnings ratio. Price-earnings ratio = stock price / earnings per share, looks very simple, it is really practical to use.

Let me give you an example.Guizhou MaotaiP/E ratio is 32 times,Yanghe sharesThe price-earnings ratio is only 23 times.Data portThe P/E ratio is 59 times. Which company is cheaper?

First of all, we have to figure out what factors affect the price-earnings ratio? Two factors, one is performance growth, and the other is performance certainty.

Performance growth is closely related to the company's business structure and performance growth rate. The same is a 30% increase in performance, the market gives technology stocksData portThe price-earnings ratio is 59 times, while the price-earnings ratio of Maotai in traditional industry liquor is only 32 times. The market believes that technology stocks have more imagination, and future performance growth is expected to be higher. Therefore, technology stocks are considered to be more growth-oriented by the market, so they have appeared.Data portThe price-earnings ratio is significantly higher than that of Maotai. Companies in different industries cannot compare the price-earnings ratios.

Another important factor affecting the price-to-earnings ratio is performance certainty. Maotai, a more deterministic leader, will enjoy a higher P/E ratio. The less certain Yanghe risk is greater. The market needs a risk premium as compensation, so it will give Yanghe a lower P/E ratio as a risk premium compensation.

A more obvious example is Hong Kong stocks. For example, Zhonghao Environmental Protection (01363)'s share price has fallen to just over 3 gross, and the price-earnings ratio is only three times lower. Because in the Hong Kong market, the lower the P/E ratio, the greater the risk. Therefore, even if enough risk premium compensation is given, the “spicy chicken” stocks with a price-to-earnings ratio of three times are still not dare to buy.

Is the price-earnings ratio as low as possible, and the higher the worse? Everyone must have an answer to this question.

In the case of irrational market, bull market investors are blindly optimistic and continue to push up the stock price, resulting in higher P/E ratio and greater risk. In a bear market, investors are too pessimistic, the smaller the price-earnings ratio, the lower the risk.

However, in a mature market like Hong Kong, when the market is more rational, the lower the price-earnings ratio, the greater the risk.


Published on 2019-04-15 08:29:23
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Published on 2019-04-15 12:10:22
Published on 2019-04-15 17:29:43
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