stock trading acronyms
stock trading acronyms
A / E is an acronym for the price ratio earnings. This is an indicator of value. In short, this means that the price a buyer willing to pay for a stock calculated on the number of times your earnings.Let illustrate this by an example. Suppose that Citigroup, the largest bank earns $ 2 per share this year. If the action is priced at $ 20, the P / E is 10.This means an investor is willing to pay 10 times earnings per share to buy this share.
This number by itself is not as important in relative terms. Always look to the industry P / E. In this case, a composite P / E for all banks. This 15.So could be, part of Citigroup have a P / E of 10 is relatively undervalued compared to industry in general has a P / E 20. This could appear to be undervalued and a good buy. Never assume that because the P / E is low, it is a bargain buy. When a profitable company, heads losses – for example, three recent quarters Citigroup prices were low, and therefore P / E is low, because the market expects the Bank would be seriously affected by the mortgage crisis and high risk housing. Never came to that conclusion without considering the underlying facts. Buying a stock at the time of thinking that is a good deal will have unpleasant consequences.
When you find a population that has a low P / E relative to its industry, to dig and find the reasons. Is it just temporary imbalances or there are underlying causes? An example is the pharmaceutical giant Pfizer. NYSE symbol PPE. The P / E is relatively low compared with industry. It could be because the market in May know something about the Pharma pipeline – Products it plans in the market and its success, approvals, etc.. But if there are specific reasons, then he really found a market.
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