O'Reilly logo

Cotter On Investing: Taking the bull out of the markets: practical advice and tips from an experienced investor by John Cotter

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 3: The PE Ratio

Over the next couple of chapters I will look at what I regard as the two most important methods of evaluating a share: the PE and the PEG ratios. I will start with the Price Earnings ratio (PE), one of the oldest and most widely used measurements.

What is it used for?

The PE measures the value placed on a share by the market–this value is sometimes referred to as a share’s rating.

It has two main applications as a measure of relative value to see whether a share is cheap or expensive:

  1. For individual stocks. It can be used to compare the relative value of the current price of one share against another share, or against an index or sector.
  2. For overall market levels. It can be used as a means to evaluate how ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required