THE P/E RATIO: How to tell if a stock is CHEAP or EXPENSIVE | Investing for Canadians
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- Опубліковано 19 чер 2024
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Today, I'll walk you through the widely used, and misused, P/E Ratio.
#stockmarket #canada #theinvestingacademy
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Intro (0:00)
What Is The P/E Ratio? (2:20)
Advantages & Disadvantages Of Using P/E Ratios (15:43)
Outro (28:43)
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About Brandon Beavis:
Brandon Beavis was one of the youngest advisors to become fully licensed here in Canada.
In 2013, Brandon officially began his industry studies. Over the years he has completed his CSC (Canadian Securities Course), CPH (Conduct & Practices Handbook), WME (Wealth Management Essentials), 90-day Investment Advisor Training Program, attended the Manulife Professional Development Workshop in Oakville, ON, and attended countless industry seminars, conferences & events to help further his learning.
At age 20, he became a fully licensed Investment Advisor, working for one of Canada’s largest Investment Brokers, Manulife Securities. For 4 years, he worked alongside a highly experienced team at Beavis Wealth Management, specializing in High-Net-Worth Investing. He’s had the opportunity to work under his Father, an advisor of over 25 years, and has dealt hands-on with client portfolios, involving; analyzing, building, and managing multi-million-dollar client accounts.
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About Marc Beavis:
Marc is a retired Portfolio Manager, having spent over 25 years in the investment industry, managing multi-million-dollar portfolios and working with clients of all ages. He retired in 2021 and is a regular contributor to this channel.
Following his initial licensing back in 1996, he completed a number of industry courses, including the Derivatives Fundamentals and Options Licensing Course, Portfolio Management Techniques, Wealth Management Essentials, Investment Management Techniques, Fixed Income Investing, Hedge Fund Essentials, Portfolio Theory, and of course, the Canadian Securities Course.
Marc previously served as a Director of the Canadian Association of Financial Planners (Now FP Canada) including the roles of Vice President and Director of Ethics.
When working in the industry, he held the Chartered Investment Manager (CIM) Designation as offered by the Canadian Securities Institute. In addition, Marc was a Certified Financial Planner (CFP) practitioner, the industry gold standard in financial planning.
Disclaimer: The views and opinions shared on this channel are for informational and educational purposes only. Although previously licensed, the contributors are no longer industry participants and are not licensed to provide financial advice. They strive to provide you with educational information in an entertaining manner. Always do your own research and due diligence before investing. Generally speaking, you should consult a licensed investment professional before investing.
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The P/E Ratio is one of the most commonly used, and MISUSED ratios. In this video I'll walk you through how to use it and how to avoid potential traps.
Visit koyfin to learn more about their investment analytics platform: www.koyfin.com/?via=academy
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This is such a great idea! You could even do a series revolving around how to value a company! Review balance sheets and explaining how to calculate all the necessary ratios to make informed decisions! As usual appreciate all the hard work!
Good idea for another series. Thanks for weighing in. - Marc
I second this motion! One of the key skills that Rich Dad Poor Dad teaches as the key to financial success is being able to read a company's financials (basic accounting). Next to sales and marketing, learning basic accounting will accelerate folks on their path to financial peace.
I third this motion
i fourth this motion
Dad is great 👏🏻 can’t believe how comfortable he is on camera. Fantastic addition to the team, I really enjoy his videos
Thanks so much! I just have to adjust from looking into people's eyes, to the camera lens. The people provided more feedback! - Marc
You are a great instructor. Great analogies and examples. PEG
I'd really like to know how to calculate the intrinsic value of a stock, with examples :)
Great timing for this video, I just starting looking up the p/e ratio and here is your video.
I am so happy that you jumped on board with this channel. Since you have joined I have learnt so many tools! Thank you for always sharing your knowledge!
Great video!!! I love when you go in the more technical stuff. Most trading channels always remain at the surface and not in the details.
Thanks... I appreciate you taking the time to leave your comment. - Marc
Great timing for this video Marc!! I wanted to add some moreTRP for my Canadian dividend stocks but the P/E is a bit high but I'm guessing it's because of the cancellation of the Keystone pipeline.
As for the next video it doesn't matter which one is first they're both educational and important so thanks in advance.
Thank you so much for these education videos!! I want a video of P/E to growth and Price to book!
Great info, really interesting and well explained… vote for next vidéo PEG… thanks
UA-cam playback speed in settings (cog on upper right) is my friend for this educational video.
Great video as usual. Thanks
Great breakdown of a key factor of fundamental analysis. Great stuff! 🙌
Thanks. - Marc
would love more content on financial ratios/terms and how to apply it when looking into a stock. great video
Thanks, Isaiah. We appreciate your support. - Marc
Great intro to the topic as always
Haven’t watched yet, but I know this is gunna be a great one!
Thanks! Hope you've had the chance to watch. - Marc
Thanks marc for the information. If possible please cover both P/B and PEG.
Sure thing! I will do both, it's just a matter of which will be first. Thanks for watching. - Marc
Thank you!! 🥰
Great video! Really enjoyed it! Can't wait for the next one. I prefer peg.
D A N G! This was so thorough and visual. Great job! 💯 I always wanted a clear visual explanation of this sort of content. This was perfect. And one can pause the vid and go back to review sections that need more attention to understand. Awesome!👍🇨🇦🍁💚
This is a fantastically practical and well thought out explanation of P/E ratios. Thank you Marc! And my vote is for Price to book ratio next. Although I think both P/B and PEG are excellent choices.
Thanks a lot. Vote noted! - Marc
please, please, please keep making this kind of videos. They are amazing!!!!
Love these vids Marc! Like button smashed.. i would like to see price to book :)
Awesome thank you! Appreciate the support, and I'll make not of your vote for P/B. - Marc
Great content Marc!! #1✅
I hope that you do videos on both the PEG and P/B, especially in the detailed and informative manner that you always present. I think I understand P/B better so I am interested in your insights on the PEG ratio. You had some compelling teasers in this video. I always walk away knowing more and feel that I can look at a company with a more discerning eye.
Thanks, Marc and Brandon as well as the whole team.
Thank you for a great explanation. Looking forward to both PEG and Price/book ratio. Equally ratios to understand
Thanks, Anne. Yes, both are important... we'll just have to see which one wins for the first choice! - Marc
Thx for the vid. Been looking more at that ratio when looking at value of stock prices. In the next vid would love to see you guys analyze P/B ratio.
You bet Shameer. Thanks for watching, and for leaving your comment and vote. - Marc
Awesome video
Great content as always. Thanks so much. Could you explain stocks buyback? Since the company buys back its own shares, doesn't that mean it has cash to do it so it's a good news for the company?
YES!
This is awesome content!
Thanks! - Marc
YES!!! please tell us more about each stats we should look at in details to buy or hold stocks. thank you
Noted, and thanks for your continued support. - Marc
Great video Marc. Like the explanation and info. I would like to see both PE Growth and PE Book.
Sounds good. Appreciate your support, and for sure, I'll do both in the next while. - Marc
P/b would be great for next video. Very well presented info on per. Thank you Marc
Thanks for your vote, and for watching. - Marc
Thanks for this video! Very interesting ! Question for you: Do you know what happens to stocks of company B that get purchased by company A? Does the shares get merged to company's A portfolio, does company's A share aggregate the price of company B (A+B = C) or they are reimbursed to shareholders?
What a great content, feel so lucky can learn this for free.
Thank you, this was an excellent video!!! Either one of those ratios would be great for the next video, because just as you said none of the ratios can be used in isolation.
For sure, Michelle. Thanks for your vote. - Marc
You sir are doing both:)), we let you decide which one you gonna give it a go first. Thank you!
Deal! - Marc
I'd go with PEG for the next topic. Great video as always! :)
Another great video! I'm really looking forward to learning more about other ratios! My pick would be PEG but I hope you do P/B as well later. It would be great too if you do other less known ratios such as EV/EBITDA and P/FCF. I'm curious to know if you do any discounted free cash flow analysis for some companies as well?
Also, I was so happy to discover Koyfin through your channel a few months ago! It's so hard to find good visual historical data like PE ratios on the internet.
Thanks for your great comment. For sure I'll do both PEG and P/B, and if I see enough interest in a series like this I'll keep going with more ratios and metrics. Glad you found koyfin... yes, it's a good tool, and I use it every day. - Marc
Great video! My vote is PEG
Thanks for your vote, James! Noted. - Marc
Thank you for this series. PEG, please!
Thanks for watching and for placing your vote. It will be close, but I'll do both. Just need to determine the order! - Marc
Amazing video! What do you think about the p/e ratio of Manulife? 6,73 and forward of 6.98. I never saw a p/e ratio that low. Looking forward to hear your thoughts!
Great video thanks Marc! I vote for PEG first, but would love it if you could cover them all at some point.
I will do both for sure... just a matter of which comes in first! Thanks for watching. - Marc
Thanks so for your videos. Can you do a video on how to incorporate your own company and trade within it? Tax and other advantages for trading within a corporation vs TFSA
Good suggestion. The tax rules are different within a corporation, and that's the biggest factor. - Marc
Such a valuable lesson Marc! The BBI Community is lucky you're one of the instructors. Hope all is well. 👊 My vote = PEG
Hey Scott. All is well here, yes, thanks. Trust it's the same your way. Thanks for your kind comments, and of course for your support of the channel. Cheers. - Marc
@@beaviswealth - Nothing important to complaint about... All good Marc.
Hi Mark, good lesson, yet I have some comments:
1.for REITs (Realty Income "O") a better metric to use would be FFO instead of earnings
2. in feb 2021 Merck has acquired Pandion for 1.85billion, so maybe p/E should be adjusted. According to my research Merck is at 13.65P/E
P/B for the next video. Thanks
Thanks for your comment. Interesting that you'd mention the FFO v PE for O, and I totally agree. I didn't included it in the screenshot for this video, but my reply to Nazifa when she posted that comment was:
"When assessing real estate companies, REITs, etc. PE ratios are not an indicator of value, mostly because of the huge effect of depreciation, which shows as an expense, but doesn't affect cash flow. Funds from Operations (FFO) is a much more relevant metric in this space."
But, because I used O in my example, I just focused on the PE part of the discussion to keep things on this topic. Good pick up.
As for MRK, I used the TTM PE to compare apples to apples, but yes, their forward PE is in that 13.65 range. Again, a great point that will help a lot of investors understand this measurement better. Thanks again for watching, and for taking the time to comment. And... P/B noted as your vote! - Marc
great video marc! i prefer peg
Thanks for your vote, Jesse. - Marc
PE ratio is not just one metric there are many but I agree it is a solid one
Great video
Thanks. Yes, tons of metrics to be aware of. - Marc
Loving the education you’re putting out here. As someone who has been investing my own money for the last 6yrs, I still learn with each video you gents put out.
P.S. PEG for the next video
Thanks very much for your comment, and for watching. I'll mark you down as a vote for PEG. - Marc
Thanks for the great video. Looking forward to seeing the next episodes of this series, was hoping for Something like that. My vote: price/book
Thanks, Nicolas. Appreciate your support, and will note your vote for P/B. - Marc
I vote for PEG ratio.
Great video. Thank you as always for the information! I really hope to see this series continue.
Thanks for voting, John. I appreciate you taking the time to vote, and I'll make note of your PEG preference. - Marc
both!!! but price to book first
Good to know
Thanks. - Marc
Very informative video, I really like this series. I was just wondering if diluted shares will artificially increase P/E since they decrease earnings per share?
Great question, and yes, share dilution does affect the calculation. It's not as commonly used, but doing so give a more accurate picture. - Marc
I am more interested in "Trap #4"; moreover, which metrics apply to every industry and which metrics you should use for each of the 11 sectors
Thanks for your comment. I might work in a video that addresses the differences you could expect in the metrics that vary from sector to sector. Thanks for watching. - Marc
@@beaviswealth that would be great, thank you
I have heard that it is better to use P/B for banks than to use P/E. No idea why though. Looking forward to both the PEG and P/B videos.
Great point, Stephanie. Will try to remember to address that in the P/B video. So many things to think about! - Marc
Great video. Price to book.
Thanks for your vote, Brooke. - Marc
Price to book please. Great video and thank you!
Thanks for watching, and for placing your vote, Steven. - Marc
price to book love your series
Thanks so much. - Marc
PEG ratio ;)
Great video !
Thanks, Daniel. I'll note your PEG vote. _ Marc
Teach a man to fish, dont give him fish. This is solid gold, I hope you go through all the importerna metrics like this!
Hey Cesar. Thanks for your comment, and as always, thanks for your support of the channel. - Marc
El P/E radio es una excelente forma de saber cuanto vale una empresa, también me gusta ver el P/E radio histórico para comparar las empresas con sus anteriores precios y beneficios.
"The P/E ratio is an excellent way to know how much a company is worth, I also like to see the historical P/E ratio to compare companies with their previous prices and benefits."
Gracias, Juan. - Marc
Price to book is my vote for the next one.
Hi Marc Is there a good standard. When looking at a company to have a fare p e ratio. A standard. I know there is not guaranteed I know there is a lot to take in to account.
Actually, there really isn't. There is such a variability between sectors, industries, etc., that you can't really 'rule of thumb' a PE ratio. You can compare this metric within industries, and the 'norm' will vary depending upon that industry. That would be a fair strategy. And, as always, the PE ratio, in whatever industry, would be one measurement only, as part of a bigger picture. Hope that helps.
@@beaviswealth thanks Marc. For the reply. This I will take in to count when decisions
Hi. Where can I find the "industry" PE ratio? By example, mining company or oil sector companies. Because we were told to check the PE of our stock against the average PE ratio of all the companies of the same sector. It is easy to find the PE ratio of a competitor, but the average ratio for all the companies in a particular sector?! Can you provide a source of information to get that average PE? Like in 13:03 in your video.
(BTW, I'm using WealthSimple and Yahoo Finance. Maybe that information that I'm looking for is only available when having an account with a major provider.)
Hi Joël. I generally use Seeking Alpha as a source for this. I do have a paid subscription, but I think their free version also provides this info. I don't think you can actually search by the sector, but if you select a company it will tell you what sector it's in, and show the corresponding sector. Have a look and hopefully you can see it there. - Marc
@@beaviswealth Thank you Mark for the site! I enjoy your channel, a wonderful source of informations for Canadian investors! Most YT are related to USA. :-)
I would vote for PEG, also on example of Tesla, they had a share split, can this be the reason for drop in PE?
Hey Deepak. Thanks for your vote. As to your question, a share split doesn't affect the PE, because the price and # of shares remain proportionate. The EPS isn't affected. Thanks for watching. - Marc
VET - P:E of 1.6! What am I missing?
PEG for the next video please, thank you!
I'm looking forward to the rest of the series! I vote PEG
Thanks, Bella. Thanks for your support. - Marc
Price to growth ratio next please!
P/E**
Both please
Will do both for sure.... - Marc
I prefer PEG over P/B because the former is closer to cash flow. However, I like using P/B when it comes to consumer cyclicals because they offer less services overall.
Why not just use price/free cash flow? Or EV/FCF. Actual cash flow lol
I do, but if I had to choose between the two I'd use PEG.
P/E to Growth, please!
Your vote has been counted! Thanks. - Marc
Check out any lumber company! their P/E ratio are very low as a sector. Very boom and bust industry so I can see how they have low P/E confidence.
My Vote is for PEG ratio Video. Please and thanks
Thanks, and stay tuned! - Marc
I like to know how much debt, momentum in earnings, and return on investment, which I don’t understand very well.
PEG Ratio please
PEG ratio please!
Thanks for your vote, Omar! - Marc
Price to book please
I'll mark you down as a P/B vote! Thanks. - Marc
Price to book…..it’s a number that doesn’t lie.😉 so …if a company is trading lower than what it’s worth,it’s a bargain! Right?🤔🧐
definitely agreed! just make sure that it's not the ONLY metric that you're using to valuate the stock. I always like to compare these different metrics with competitors in the same company size/industry
PEG, please :)
Noted... thanks for your vote. - Marc
Do P/B next!
Thanks for your vote!! - Marc
PEG.....please
Thanks for your vote, John.... PEG is way ahead at the moment! - Marc
I like PEG for next please
Thanks for voting... I think PEG is winning, but we'll see in the final tally. - Marc
Mr. Beaves... You are so handsome...
So can't we go to the bottomline for people to understand better? Like for example Solid sales and competitive advantage/unique value is one of the reason in choosing a stock. Or the fundamentals of the stock/company. There is this price to sales ratios (lower than 10 or 1.0 is better). For the forward p/e the fair value is 14 to 16. Price earning to growth ratio is 1.0 or less, etc. So at least the viewers have a gauge on all of these. I think you can request the stock market since they do come up with these numbers and ratios, etc. for each of the stocks. There is also the 52 (weeks) factor.
I vote for price to book ratio
Thanks for the vote! - Marc
P/E to growth
Your vote has been counted! - Marc
PEG!
Thanks for the vote! - Marc
Price to free cash flow!
Thanks for voting.... that wasn't a choice this time around, but I will try to work it into a future video. - Marc
Oh that will be a great 3rd video!
I want both the videos but I want PEG first....
I like that. I will do both. - Marc
PRICE TO BOOK!!!!
P/B... Loud and Clear! Thanks! - Marc
Discounted free cash flow!
Also, I think talking about why some companies or sectors get different multiples is important.
First to view
PEG
vote goes to PeG!
Vote counted! Thanks. - Marc
only kids choose an option, I want both 1 and 2
Peg
Thanks, Li. - Marc
1. Vote for PEG please.
You got it! Thanks for the vote. - Marc