P/E ratio, English name is Price English ratio, also known as "cost-benefit ratio", "stock P/E ratio" or "market P/E ratio". P/E ratio is one of the most commonly used indicators to evaluate whether the stock price level is reasonable. Divide the stock price by the annual earnings per share (the market value of a company divided by the annual profits attributable to shareholders can also get the same result).
When calculating, the stock price usually takes the latest closing price, and if EPS is calculated according to the published EPS of the previous year, it is called historical price-earnings ratio;
Generally, consensus estimation is used to calculate the estimated P/E ratio, that is, the estimated average or median value obtained by the institutions that track the company's performance after collecting the forecasts of many analysts. What is a reasonable price-earnings ratio, there is no certain standard.
P/E ratio is the ratio of share price to earnings per share. The price-earnings ratio widely discussed in the market usually refers to the static price-earnings ratio, which is usually used as an indicator to compare whether stocks with different prices are overvalued or undervalued.
It is not always accurate to measure the texture of a company's stock with price-earnings ratio. It is generally believed that if the price-earnings ratio of a company's stock is too high, then the price of the stock is in a bubble and its value is overvalued.
When a company grows rapidly and its future performance is promising, when comparing the investment value of different stocks with P/E ratio, these stocks must belong to the same industry, because the company's earnings per share are close and the comparison is effective.
P/E ratio (static P/E ratio) = price of common stock per stock market ÷ annual income of common stock per share.
Extended data:
Influencing factors of P/E ratio:
1, dividend payout ratio B. Obviously, dividend payout ratio appears in both numerator and denominator of P/E ratio formula. In molecules, the greater the dividend payment rate, the higher the current dividend level and the greater the P/E ratio. But in the denominator, the greater the dividend rate, the lower the dividend growth rate and the smaller the P/E ratio. So the relationship between P/E ratio and dividend rate is uncertain.
2. Risk-free return on assets. Since the yield of risk-free assets (usually short-term or long-term treasury bonds) is the opportunity cost of investors and the lowest yield expected by investors, the risk-free interest rate rises, the return on investment required by investors rises, and the discount rate rises, resulting in a decline in P/E ratio. Therefore, the relationship between P/E ratio and risk-free asset yield is reversed.
3. The expected rate of return on market portfolio's assets. The higher the expected rate of return on market portfolio's assets, the greater the extra income that investors need to compensate for the average risk that exceeds the risk-free income, the greater the investment return required by investors, and the lower the P/E ratio. Therefore, the relationship between the P/E ratio and the expected return rate of assets in the market portfolio is reversed.
4. β coefficient β without financial leverage. Enterprises without financial leverage have only operational risks and no financial risks. The beta coefficient without financial leverage is an index to measure the business risk of enterprises. The greater the beta coefficient, the greater the business risk of the enterprise, the greater the investment return required by investors and the lower the P/E ratio. Therefore, the relationship between P/E ratio and beta coefficient is reversed without financial leverage.
5. Leverage D/S and equity multiplier L both reflect the debt level of the enterprise. The greater the leverage, the greater the equity multiplier, and the two change in the same direction, which can be collectively called leverage ratio. In the denominator of the P/E ratio formula, both the minuend and the minuend contain the leverage ratio.
In neglected (return on investment), the leverage ratio increases, the financial risk of the enterprise increases, the return on investment increases, and the price-earnings ratio decreases; In the reduction (dividend growth rate), the leverage ratio rises, the dividend growth rate rises, and the reduction increases, leading to an increase in P/E ratio. So the relationship between P/E ratio and leverage ratio is uncertain.
6. Corporate income tax rate T. The higher the corporate income tax rate, the more obvious the advantages of corporate debt management, the lower the return on investment required by investors, and the greater the P/E ratio. Therefore, the relationship between P/E ratio and enterprise income tax rate is positively correlated.
7. The net profit rate of sales is M. The greater the net profit rate of sales, the stronger the profitability of the enterprise, the greater the development potential, the greater the dividend growth rate and the greater the P/E ratio. So the relationship between P/E ratio and net profit rate of sales is positive.
8. Asset turnover rate. The greater the asset turnover rate, the stronger the enterprise's ability to manage assets, the greater the development potential, the greater the dividend growth rate and the greater the P/E ratio. So the relationship between P/E ratio and asset turnover rate is positive.
Baidu Encyclopedia-P/E ratio