PE Ratio Explained (With Examples)
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- Опубликовано: 5 июл 2024
- Don’t use the PE ratio until you watch this video. In this video, you will learn about the most popular valuation ratio: the Price to Earnings ratio. The PE ratio helps you to see how cheap or how expensive a company is but be careful, there's a secret about the PE ratio you need to understand.
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TIMESTAMPS
00:00 PE Ratio in Stock Market
01:27 PE Ratio Simple Example
02:25 Where the E of the PE ratio comes from
04:30 Valuation for a Bakery Business
07:04 CocaCola and McDonalds Compared
07:55 Most important lesson of this video
09:44 Earnings growth rate
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I recently came across your videos and I love them! You explain things so well. I just wish you were still making videos!
I've watched a few of your videos. What I love most is how easy it is to understand what you are saying and to be able to apply it quickly in my investing strategies. Thank you
Wow thanks Lev I really appreciate your commenting to let me know that :)
Thank you so much,best video
Great video, thanks!! 🙏
It’s so good he is explaining it in sign language too
HAHAHA!
Getting to the point where I find myself looking forward to the new videos every week. Nice work again guys
Thanks Will 🙏🙏
Awesome... Such a great example... Learnt with simple way... Thank you very much Richard..
My pleasure I’m glad it was informative for you:) thanks for your support - from me and my girlfriend (the awesome video editor)
Great job
Clear and easy explanation to understand. Thanks!
Perfect! Glad you enjoyed it :)
your videos very clear love it.
Good I’m glad it helped :)
Thanks for sharing this key fundamental. I have trouble still on which value to use for earnings. It seems like their are so many values after adjustment. New subscriber here!
Glad it was helpful! Yes I hear you. Sometimes a metic like Enterprise Value / Free cash Flow can be a better choice. Buffett's "owner earnings" is also worthwhile but you'll need to calculate that for yourself because it's not on financial websites. Thanks for the support.
Cool, thanks 😊
hey there for the last part around 9:20, how did we get the ROIS of 136 and 55.50 percent?
“ROI is calculated by subtracting the initial cost of the investment from its final value, then dividing this new number by the cost of the investment, and finally, multiplying it by 100.”
136% = ((47.20-20)/20)x100
55.5% = ((15.50-10)/10)x100
Well explained 👍, thank you!
Glad it was helpful! Thanks for being a subscriber and for commenting I appreciate your support Gyula :)
I love that explanation, very simple..thanks
Thanks JB!
Great information regarding that there is more to it the just looking at the PR ratio. And the importance for net income vs gross income. Thanks for all the great information.
Glad it was helpful!
thanks man the example was great
Perfect :)
keep up the good content!
Thanks Meixo!
The best video ever on explaining PE.
Oh thanks for this great comment
the best teacher i never had until now 🥸
Good!
This guys is really intense.. really in your face. He probably french kisses dividends. Go dude!
Haha, thanks..? 😘
Thank
great, thanks!
You're welcome!
can you compound the earning per share that they make more profit annually or is it a company insider stuff?
I don’t understand the question however it’s good to look at the companies historical returns on capital. Something companies can reinvest a high returns. Other companies need to sink most of their cash into staying where they are.
You have a talent for explaining... Just need to find your niche so your content becomes higher value add. I'll follow you on your journey. Good luck.
Thanks Louise :) Stock investing is what I'm most passionate about and I've got a lot more to say/teach on the subject :)
Great , Watching Everyday
Respect! Gad you’re enjoying! If you have any questions at any point I’m here for you
Awesome, thanks. Is the second part Forward PE?
It’s PEG
How do we calculate EPS growth rate in the future?
We can see historical growth rates and make conservative guesses. I think it’s actually better to look at a companies historical returns on capital though. Some other videos on here I talk about return on capital.
Hi. For example, the situation is as follows: I am seeking financing to acquire a business. I approached a potential investor who asked several questions, one of which was: What is the Debt/Equity ratio of financing? Now, I'm wondering and feeling confused about what the potential investor means by asking this question. Is "Debt/Equity ratio of financing" the same as "Debt/Equity ratio," or is it something else?
I think this person would be referring to the same thing, yes.
Send them the financial statements they’ll need them anyways
@@IntelligentStockInvesting Thank you.
Subscribe for a new video every week :) ruclips.net/channel/UC8hyOJoF1gS_uGUL5uQqRhg
You should make a video About growth stocks without pe😊
I could possibly do something like that :) what would you suggest I title such a video?
How did you obtain 47.20 and 2.36 or the 15.50 and 1.55? 9:39
Company B Growing by 5%
Year 1: $1.00 EPS
Year 2: $1.05
Year 3: $1.1025
Year 4: $1.157625
Year 5: $1.21550625
Year 6: $1.2762815625
Year 7: $1.340095640625
Year 8 $1.40710042265625
Year 9: $1.477455443789063
Year 10: $1.551328215978516
I rounded it down to $1.55 per share.
IF the shares are STILL trading at 10X earnings on the market, that would translate to a share price of $15.50.
For company A growing by 10%
Year 1: $1.00 EPS
Year 2: $1.10
Year 3: $1.21
Year 4: $1.331
Year 5: $1.4641
Year 6: $1.61051
Year 7: $1.771561
Year 8 $1.9487171
Year 9: $2.14358881
Year 10: $2.357947691
I rounded it up to $2.36 per share.
IF the shares are STILL trading at 20X earning on the market, that would translate to a share price of $47.20.
Hope this helps.
@@IntelligentStockInvesting yes thank you so much now I understand everything, but why don't you make more videos? I saw a couple of them you are doing a great job
@@grishi493 The time investment isn't worth it for me right now. I will make videos again someday but for now, I'm busy with other things. Still investing my own money of course.
@@IntelligentStockInvesting I understand, anyway thanks for those videos I'm learning a lot
no problem :)
Is growing EPS the same as future EPS?
Sorry I don’t understand the question
@@IntelligentStockInvesting I think I'm mixing up Forward P/E Ratio with growing EPS.
The forward P/E ratio is a current stock's price over its "predicted" earnings per share. Not sure who’s making these predictions..
Earnings per share growth rate you just look at what earnings per share was 3-5 years ago compared to now and determine the rate at which it has grown annualized.
@@IntelligentStockInvesting got it! Thanks!
Who can reliably predict earnings growth into the future beyond 1-2 years?? 2020 has given a clear answer to that.
That's kind of the job you're signing up for when you decide to buy business (stocks). And it's why you want to also be very conservative with your estimates so that there is a "margin of safety" AKA lots of room for you to be wrong and still wind up on top. Thanks for your comment :)
You can wait for good business shre price lower than book value. And events like 2020 gives more oppurtunity to buy good business below the book value
the E in PE is earnings PER SHARE. Not exactly earnings. Am i wrong?
Price per share / earnings per share OR market cap (which is essentially the price for the entire company) / total earnings.
@@IntelligentStockInvesting Ah i see. Thanks for the explanation! I am still new to investing.
No problem
Why can't I save this video???
Less hands movement please. Distracting.
Noted. Thanks. I'm naturally pretty low energy and a slower speaker so I'm trying to find a balance of upping the energy to keep people engaged but also stay authentic. I'll find the sweet spot eventually :) thanks for your support!
Stop moving your damn hands so much. Geeze.
Thanks for your feedback