2015 December

Obsession with P/e Multiple

Posted by | Food for thought, Investing wisdom | 12 Comments

Maruti says we are a country obsessed with mileage; see its famous NASA ad ‘Kitna Deti Hai’

Indians are known to be very smart consumers; always looking for value-for-money offerings. Fortunately or unfortunately, that should make us very good ‘Value Investors’ as defined by Ben Graham.
However, how do we know if a stock is a bargain or not? By default P/e ratio has become that barometer on which majority is trying to answer this critical question. You mention a stock and the first question would be ‘Boss iska P/e kitna hai?’ (How much is its P/e?)

P/e which is price-to-earnings ratio is the most commonly used valuation ratio to make sense of how expensive or cheap a stock is. The reason for its popularity is its simplicity;

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