price to earnings ratio
Is a High P/E Ratio Dangerous?
The P/E ratio is a time-honored way to value stocks but in today’s market P/E ratios are sky high. Is a high P/E ratio dangerous? The P/E ratio compares company earnings to its share price. Both forward and trailing P/E ratios are commonly used to assess stock valuation. Over the years, a stock that has a P/E ratio higher than other’s in its market sector is either expected to grow or is simply overpriced. The problem today is that so many stocks have high P/E ratios, which casts doubt on the value of this metric.
Intrinsic Value of Stock
Successful long term investors consider the intrinsic value of stock before buying and when deciding to sell. This approach to stock investing goes back to the black days following the 1929 stock market crash which ushered in the Great Depression. Benjamin Graham taught investors that they did not need to play the market as though […]