{"id":19196,"date":"2011-09-28T20:45:00","date_gmt":"2011-09-28T15:15:00","guid":{"rendered":"index.php\/2011\/09\/28\/making-pe-work-for-you\/"},"modified":"2011-09-28T20:45:00","modified_gmt":"2011-09-28T15:15:00","slug":"making-pe-work-for-you","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2011\/09\/28\/making-pe-work-for-you\/","title":{"rendered":"Making P\/E work for you"},"content":{"rendered":"
\"common<\/a> <\/p>\n

Image via Wikipedia<\/a><\/p>\n<\/div>\n

The general rule with Price-Earnings ratios (P\/E) is that the lower a stock\u2019s p\/e, the better. And a P\/E of less than, say, 10, represents excellent value. A low P\/E implies more profit for every dollar you invest. However, P\/E is only the starting point in researching stocks. Here are some gotchas that you should be aware of:<\/p>\n

    \n
  1. One-time gains can artificially inflate a company\u2019s P\/E<\/strong>: When a company sells assets, it enjoys a one-time bump in earnings that might make the P\/E ratio artificially low. And similarly when there are one-time write-offs<\/a>, P\/Es get high. In either of the two cases, P\/E is not a gauge of the company\u2019s true ongoing operating earnings.\n
  2. A low P\/E can be a danger sign<\/strong>: Low P\/Es may come about because well-informed investors are selling the stock and pushing the price down, regardless of earnings. In other words, unusually low p\/e\u2019s can be a sign of danger rather than a clue to a bargain. For example, the 2.73 PE<\/a> of Aarvee Denims<\/a>\n
  3. Don\u2019t ignore stocks with high P\/E<\/strong>: Growth stocks<\/a> have naturally high P\/Es. You should expect to pay more for companies with long-term earnings potential. However, stocks with high P\/Es tend to be more vulnerable during periods of broad market setbacks. For example, the nearly 205 PE of Adani Enterprises<\/a> that has a 50-day volatility close to 80%.<\/li>\n<\/ol>\n

    Happy investing! <\/p>\n

    \"\"<\/div>\n","protected":false},"excerpt":{"rendered":"

    Image via Wikipedia The general rule with Price-Earnings ratios (P\/E) is that the lower a stock\u2019s p\/e, the better. And a P\/E of less than, say, 10, represents excellent value. A low P\/E implies more profit for every dollar you invest. However, P\/E is only the starting point in researching stocks. Here are some gotchas … <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[28],"class_list":["post-19196","post","type-post","status-publish","format-standard","hentry","category-your-money","tag-basic","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/19196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=19196"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/19196\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=19196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=19196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=19196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}