P/E ratios for different sectors?

rhinoceros · 22 August 2006

Hi all

Beginner here. Just wondering where i can find, or what are the benchmark p/e ratio's for different sectors. For example, I was looking at COH, having been involved in that industry, and the PE of around 35 meant little is I didn't know the average of the health industry. Is 35 high?

Having a 9-5 job, don't have much time for reading and fundamental analysis. But I feel very comfortable with charting and excel sheets and all. Does that mean IPO's are a no go zone for me, coz, you nee dto be read up on all that, right?

Anyway, any tips for starting off? Ive read up and have knowledge on what to look for and the charting stuff.

Cheers

Realist · 22 August 2006

Re: Beginner (and p/e)

The average PER for the ASX is 15.8.

Historically IPO's have performed poorly, they are always a risk.

don't have much time for reading and fundamental analysis. But I feel very comfortable with charting and excel sheets and all.

Well if you can't be bothered doing any research but are prepared to put your hard earned money into a company you know little about, what results are you expecting?

Seriously that is a poor attitude. Wake up!!

IT IS YOUR HARD EARNED MONEY YOU ARE RISKING.

Put some effort in!

rhinoceros · 22 August 2006

Re: Beginner (and p/e)

I just downloaded a prospectus thats 125 pages long, when exactly am I meant to read it?

IPO's always a risk, then they are. But there aren't the hours in the day. Can you accept that?

Realist · 22 August 2006

Re: Beginner (and p/e)

rhinoceros said:
I just downloaded a prospectus thats 125 pages long, when exactly am I meant to read it?

IPO's always a risk, then they are. But there aren't the hours in the day. Can you accept that?

Who said you had to read 125 pages?

What is the company called? What will the company sell? what will it's market cap be? and what percentage of the company will be released to the public via this IPO?

rub92me · 22 August 2006

That's a bit of a harsh response there, Realist; this is the 'Beginners Lounge' after all. Rhino, the question is really whether you favour Fundamental Analysis (FA) or Technical Analysis (TA) or a bit of both. You appear to have started off with TA. TA is no good for IPOs as you have no historical performance to chart with. FA can take a lot of time and effort to do properly, so if you don't have the time, then IPOs are probably not for you or you should ask professional advice. Whether FA is any better than TA is debatable (and continues to be debated at length in this forum). Doing a lot of research will definitely make you feel better about the investing decisions you make. Unfortunately it won't guarante that you will always make the right decisions...

Realist · 22 August 2006

rub92me said:
That's a bit of a harsh response there, Realist; this is the 'Beginners Lounge' after all. ...

True, sorry.

I just wanted to shake him up, so that he realises that a bit of time studying and doing some research may mean he makes alot of money instead of loses alot of money.

I thought it was pretty silly to say "I have no time to study" to be honest.

doctorj · 22 August 2006

Re: Beginner (and p/e)

Realist said:
Well if you can't be bothered doing any research but are prepared to put your hard earned money into a company you know little about, what results are you expecting?

Seriously that is a poor attitude. Wake up!!

Realist, please keep your replies in the spirit of the forum.

The OP has not said they're not prepared to do any work, they've just said that they don't have the time to spend on in depth fundamental analysis.

The great thing about a chart is that if you subscribe to the efficient market theory school it does all the fundamental analysis for you.

Different strokes for different blokes. We all have practical limitations on our trading and investing. The successful ones maximise their utility and assess their performance accordingly.

--
Edit: Please note that I started typing this before you replied above.

Realist · 22 August 2006

Fair enough, I apologise. It was not meant to be nasty, just to get you to think I suppose.

sorry.

Kipp · 22 August 2006

rhinoceros said:
Hi all

Beginner here. Just wondering where i can find, or what are the benchmark p/e ratio's for different sectors. For example, I was looking at COH, having been involved in that industry, and the PE of around 35 meant little is I didn't know the average of the health industry. Is 35 high?

Cheers

Yes 35 is high.
I'm sure if you search other threads you'll find average P/E's by sector- as it does very much depend on the sector what an "average" P.E. is.
For comanies with stable earnings, or at least "more stable/low risk" (e.g. banks, retail) they trade pretty close to 14-16.

Mining stocks tend to be less as they are higher risk. At the moment many are trading at P/E under 8 because it will difficult for future earnings to be as high as they are currently (when commodities return to normal)

But having said that. Seek is trading at ~35x earnings due to its excellant profit growth this past year.
So there are no rules. But personally, I'd stear clear of anything over 20 (Forward earnings). The dividends are also lame on high PE companies.

michael_selway · 22 August 2006

Kipp said:
Yes 35 is high.
I'm sure if you search other threads you'll find average P/E's by sector- as it does very much depend on the sector what an "average" P.E. is.
For comanies with stable earnings, or at least "more stable/low risk" (e.g. banks, retail) they trade pretty close to 14-16.

Mining stocks tend to be less as they are higher risk. At the moment many are trading at P/E under 8 because it will difficult for future earnings to be as high as they are currently (when commodities return to normal)

But having said that. Seek is trading at ~35x earnings due to its excellant profit growth this past year.
So there are no rules. But personally, I'd stear clear of anything over 20 (Forward earnings). The dividends are also lame on high PE companies.

yes have to look at current PE, forward PE and changes in forward PE

thx

MS

billhill · 22 August 2006

Rhinoceros,
Get an account at ninemsn (its free) and you can research companies statistics under the buisness and investing section of the site. It will tell you the company's PE, the market PE and the sector PE as well as a heap of other stats. I find it very useful.

http://money.ninemsn.com.au/shares-and-funds/

Billhill

2020hindsight · 22 August 2006

Kipp said:
Yes 35 is high.
I'm sure if you search other threads you'll find average P/E's by sector- as it does very much depend on the sector what an "average" P.E. is.
For companies with stable earnings, or at least "more stable/low risk" (e.g. banks, retail) they trade pretty close to 14-16.

Mining stocks tend to be less as they are higher risk. At the moment many are trading at P/E under 8 because it will difficult for future earnings to be as high as they are currently (when commodities return to normal)

But having said that. Seek is trading at ~35x earnings due to its excellant profit growth this past year.
So there are no rules. But personally, I'd stear clear of anything over 20 (Forward earnings). The dividends are also lame on high PE companies.

Kipp, how is it that companies like (miner) CBH remain "dormant" with P/E around 3. - relatively stable etc. Long term one would expect this to go places surely. Even if it halved its predicted earnings, that make 6!. << 15. I guess we just keep telling ourselves that logic will win out in the end.

bvbfan · 22 August 2006

P/E's are also a function of expected future growth in profits, so while 36 may be high against the market at 15 or so, is 36 high compared to say other growth models?

In 1999 a few of tech companies were on P/E's of 50, then they went to P/E's of 100+
Cisco, Yahoo, Microsoft etc

I'm guessing but Media and Biotech may trade at higher P/E's due to preceived growth prospects/

rhinoceros · 22 August 2006

Well, i didn't really need shaking up, having read some texts and had dry runs using my own little charts, the resistance points, stochastic thing and other indicators.

Thanks for replies, obviously a fundamental vs technical is a key issue, as the books say too. I obviously feel my strength is tech analysis, via time and what skills I have. Although I do read up on things too.

Anyway, will heed advice.

Realist · 22 August 2006

2020hindsight said:
Kipp, how is it that companies like (miner) CBH remain "dormant" with P/E around 3. - relatively stable etc. Long term one would expect this to go places surely. Even if it halved its predicted earnings, that make 6!. << 15. I guess we just keep telling ourselves that logic will win out in the end.

I don't believe CBH has a PER of 3.

At best it is about 30. 9 Mill out of Market Cap of about 270M.

I look at 5 years worth of earnings to work out an average PER, 1 year can be an anomaly.

Realist · 22 August 2006

rhinoceros said:
Well, i didn't really need shaking up, having read some texts and had dry runs using my own little charts, the resistance points, stochastic thing and other indicators.

Thanks for replies, obviously a fundamental vs technical is a key issue, as the books say too. I obviously feel my strength is tech analysis, via time and what skills I have. Although I do read up on things too.

Anyway, will heed advice.

Good man, give it a go, but be careful!

michael_selway · 23 August 2006

2020hindsight said:
Kipp, how is it that companies like (miner) CBH remain "dormant" with P/E around 3. - relatively stable etc. Long term one would expect this to go places surely. Even if it halved its predicted earnings, that make 6!. << 15. I guess we just keep telling ourselves that logic will win out in the end.

Hi dude also have to look at mine life and spot comodities prices in the future

as well as current PE, forward PE and changes in forward PE, and Risk

thx

MS

P/E ratios for different sectors?

rhinoceros

Realist

Billie Jean is not my lover

rhinoceros

Realist

Billie Jean is not my lover

rub92me

Don't look back

Realist

Billie Jean is not my lover

doctorj

Hatchet Moderator

Realist

Billie Jean is not my lover

Kipp

Lord of the Ledgers

michael_selway

Coal & Phosphate, thats it!

billhill

2020hindsight

bvbfan

rhinoceros

Realist

Billie Jean is not my lover

Realist

Billie Jean is not my lover

michael_selway

Coal & Phosphate, thats it!

Similar threads

P/E ratios for different sectors?

Billie Jean is not my lover

Billie Jean is not my lover

Don't look back

Billie Jean is not my lover

Hatchet Moderator

Billie Jean is not my lover

Lord of the Ledgers

Coal & Phosphate, thats it!

Billie Jean is not my lover

Billie Jean is not my lover

Coal & Phosphate, thats it!

Similar threads

Privacy & Transparency

Privacy & Transparency