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26 Nov 2018 (AFR) – Market minds: Looking through the P/E multiple to unlock value

[COMMENT: I cannot help but comment on this article. It includes a good discussion about the usefulness, or otherwise, of the PE multiple when looking for shares to buy. After reading this one I became even more convinced that the PE might generally be useful (eg. lower PE is better), but that it cannot be relied upon in the way that some investors rely on it.]

(26 November 2018, AFR, p22, by Julian Beaumont)

‘Most investors think of a company’s price-to-earnings (PE) multiple as defining its value. For them, a stock on a PE multiple of 12 times is cheap, while one on 24 times must be expensive. But is it that simple?  The PE multiple is calculated by dividing the share price by the upcoming year’s earnings. This necessarily requires a forecast, and in practice most rely on the consensus derived from an average of brokers’ estimates. However, as with all forecasts, these can change over time and end up wrong.’

Read more at (might need AFR login access, or try:


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Brainy's Share Market Toolbox. Read the honest truth about the sharemarket. Develop or fine tune your investing/trading strategies using share price charts (technical analysis), or learn about the investment strategies of others. Melbourne (Australia) based - supporting share market investors and traders to build wealth through smarter investing using my Share Market Toolbox arsenal of weapons to tackle the market.


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