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Importance of P/E ratio?

Discussion in 'ASX Stock Chat' started by mime, Oct 1, 2004.

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  1. mime

    mime

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    How much does a companys PE ration factor in when you choose a stock?

    I won't buy a stock with a high PE ratio.
     
  2. Mofra

    Mofra

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    Re: PE ratio

    Mime,

    Personally when I buy a stock for a MT/LT hold on fundamentals, PE figures very highly as a stock with a low PE would be more leveraged for a rise with positive news or added value to its business. It is certainly not the only factor to take into account - it is very important to find out why a stock has a high PE in the first place. If a stcok has fallen causing the PE to rise, it doesn't always make it a bargain buy - there could be a continued deteriation in the prise or the underlying fundamentals of the company will remain poor, justifying its fall. Often if a company has released a profit target for the year I will calculate my own PE figure based on the company achieving those targets and compare this to the sector average to get an idea of how it will perform in relation to its peers. Of course, everyone trades & invests differently and its important to devise your own strategies that best suit your needs.

    Cheers
     
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