P/E ratio

predictability of P/E ratio and how does it react differently under different conditions; Basu (1977) was one of the main journal this paper heavily depend on which gave us generous knowledge and answers to the predictability of P/E ratio. Basu(1977) concluded low P/E ratio portfolios implied higher return than high P/E ratio portfolios and tested the market efficiency hypothesis. Davis, Aliaga-Diaz and Thomas (2012) qualified the modest predictability of 1-year P/E ratio and 10-year P/E ratio among all

looking at the P/E ratio of the chosen stocks I believe that each of them varies from being underpriced, fairly priced, or overpriced when compared to the peer and the industry as a whole for each. For McDonald’s I feel that this stock is fairly priced. Yesterday the stock price was 158.90 and 30 days ago it was 153.96 and the P/E ratio is 26.0492 and if I purchased 100 shares I would have a 3.2% share return. This would mean that the company’s growth looks good and the P/E ratio is fairly priced

outstanding, there are some problems in respect of the share price appreciation. Firstly, P/E ratio will be used to evaluate the company’s stock and factors which affect company’s P/E ratio will be listed. Furthermore, discounted dividend valuation model will be demonstrated and fundamental factors which impact the share pricing will be analysed. Finally, the value of ICC at 30 June 2010 will be calculated using P/E ratio and DDM model. Meantime, the weakness of those two models will be illustrated, and

volatility, the CFO is looking into better understanding how Palm is valued in the market. Managers/CFOs often use heuristics for valuation purposes as opposed to traditional methods such as the DCF. Metrics such as the ones used by Palm's CFO, the P/E and price-to-sales, are often easier to use and require less research and fewer variables. However, relying on such metrics can lead to the affect heuristic. DCF is the methodology that should be used to ensure the fundamental value is accurate.

standards vary widely across firms, P/BV ratio can not be comparable across firms. It can be misleading to investors when there are significant differences in the asset intensity of production methods among the firms.Book value may not carry much meaning for service firms which do not have significant fixed assets. The book value of equity can become negative if a firm has a sustained string of negative earnings reports, which lead to a negative P/BV ratio. P/BV can be misleading to investirs when

is relatively low but so is its P/E. Amazon.com operates in a evolving industry and the company first became profitable in 2003. Its business risk is relatively high and so is its P/E. For these firms, factors other than risk must be influencing the P/E ratio differences. • Without a detailed examination of the financial reporting practices and related disclosures of each company, it is difficult to draw conclusions about the degree to which the P/E ratio differences might be related to

historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000. Financial Statement Ratios Profitability Ratios The ratios returns on investment (ROI) and return

they stayed pretty consistent with the market fluctuating back and forth with each other. In 2016 GE outperformed the market significantly. Overall, GE stock increased 16.48% in the last 2 years, whereas S&P 500 only increased 8.9% in those two years. Jensen’s Alpha, Sharpe Ratio, and Treynor Ratio are performance evaluation measures that all have to do with the return the company earned based on the risk that was taken. Jensen’s Alpha takes into account the realized return of the portfolio, realized

concepts of the Capital Asset Pricing Model (CAPM), the expected return for Wal-Mart stock is 7.01% [E(R)]. This is a result of a risk-free rate (Rf) of 3.68%, which was the provided 10-year government bond yield to use as a proxy for the risk-free rate. The beta (β ) of Wal-Mart was 0.66 according to the provided Bloomberg beta estimate. Additional data was provided on the U.S. market risk premium [E(RM) – Rf] of 5.05%. In following the general concepts of CAPM, there are some general assumptions:

However, a lower P/E ratio can also be generated with one-off abnormal earnings (Phan, 2011). In 2008, share prices dropped mainly due to the US sub-prime crisis, which started in 2007 (Lixi, 2008). This had a huge impact on the P/E ratio for 2008, which is slightly below the threshold of 10 times. The P/E ratio for ANZ was higher than NAB in 2009 and there was lesser fluctuation in ratio. Share prices tend to rise with improved economic conditions