PE Ratio Explained Simply | Finance in 5 Minutes!
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- Опубліковано 23 лип 2024
- Interested in learning what the PE ratio in stocks is? Also known as price to earnings ratio, this metric is explained simply for beginners in this 5 minute video!
P/E ratio is a valuation metric that gives investors a quick look at how the market is currently valuing a company. It is a good first step when determining if the stock is currently at fair value, undervalued, or overvalued! Stocks with a low PE ratio, something around 10x, would be considered cheap and possibly undervalued. Inversely, stocks with a high PE ratio, say 50x or more, would be expensive and may be considered to be overvalued.
Price to earnings ratio can be found by dividing the stock’s current price per share, by its current earnings per share. The output gives you a multiple, sometimes referred to as a price multiple or earnings multiple by investors.
PE ratio really shows it's strength when comparing multiple companies, within the same industry, to understand how each company is valued. You can use the PE ratio to make a more informed decision about which company may be better value for your money.
Keep in mind that using PE ratio to compare companies across industries is not very useful. Different industries will have different standards and expectations that will effect PE ratio. For example, companies within the technology sector usually boast much higher PE ratios than companies within the consumer staples sector. For this reason, it is not recommended to use PE ratio as a basis for comparison across different industries and/or markets.
This video is part of my Stock Market Basics playlist.
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🕒 Time Stamps!
00:00 Intro
00:24 PE Ratio Explained
01:02 PE Ratio Calculation
01:30 Example
02:13 Comparison Between Companies
03:42 Comparison Across Industries
04:36 Finding PE Ratio
05:10 Thanks for Watching!
💻 Check out the Stock Market Basics Playlist for more videos like this!
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Disclaimer
This channel is for entertainment purposes only and is not investment advice. All videos published on this channel are informational in nature and are not intended to give advice or recommendations about any particular security or investment. Before making any investment decisions, I would recommend you to speak to a financial professional that is qualified to provide advice.
How do you use PE ratio to value a company?
In the real world (not the stock market), we would aim to sell a business at a PE ration of 2, as a rule of thumb. Stock market PE ratios are just really for information id say
you need to consider the debt level
Its worse here, our economy is like a flailing fish, fighting for its life. The normal state of the U.S. economy is actually very bad. Because of this it goes into convulsive spasms fighting to grow any way it can out of desperation. Tricks, gimmicks, rule changes try to stimulate the economy and prevent it from falling but they only bring temporary relief to people since, when you factor in inflation we are declining.
People believe their currency has the worth it does because they have no other option. Even in a hyperinflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.
I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.!!
Angela Lynn Schilling is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
Every week I buy more of whatever is the lowest percentage of my portfolio and try to keep everything around 10%. Please what could be my safest buys with $400k to outperform the market in 2024?
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
who is your advisor please, if you don't mind me asking?
Amber Dawn Brummit is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
This is quite educational. It's crucial for newcomers to keep in mind that the financial markets are highly irrational in the short run. You should constantly be ready for the unexpected. That is how chance operates. Because of the inherent risks in the market, I always favor long-term investments.
These uncertainties will always be there. Thing is, every once in a while, the market does something so stupid it takes your breath away. If youre not ready for it, you shouldnt be in the market business. or get you a skilled practitioner.
This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.
Mind if I ask you to recommend this particular coach you using their service?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
I just copied and pasted her full name on my browser, super impressed with what I've seen so far. thanks for sharing!
I’m a god of devaluation, I buy a stock and it goes down! Why I can't make earnings is beyond me. It can be annoying how volatile the market is. How can I ride this fresh wave of all-time highs without getting burned again with 450k set aside to get fully invested this year?
from my study, 90% of the time in an election year, the stock market stays positive for quite a long time. 2024 is no exemption, but it is better to be guided, ideally by a well experienced and licensed advisor
Certain Mag 7 companies are rumoured to be overvalued and might cause a market correction, I’d suggest you go with a managed portfolio, but even those don’t perform so well, so it’s best you reach out to a proper fiduciary to guide you, that’s what works for my spouse and I. We've made over 80% capital growth minus dividends.
this is all new to me, where do I find a fiduciary, can you recommend any?
"Jennifer Leigh Hickman" is who i work with and she is a hot topic even among financial elitist in Texas. Just browse, you’d find her, thank me later.
Try to inverse all your positions, you should be making money in that case
this is the best explanation of PE on the web, still since my last post
Thank you I’m new to investing and I’ve been trying to understand P/E ratio. After reading many lengthy articles, without having a clear idea, I happen across your video, and I have a better grasp of the subject. You earned a new subscriber, and I look forward to studying with you
Good job man! You really explained it clearly and in a way that most people would understand.
Very clear and entertaining explanation of a largely misunderstood concept. Congratulations!
I remember having a consultation with a financial analyst last August, and it was incredibly insightful. Can’t stress enough how helpful experts in this field are!
As long as you diversify your portfolio, any single stock or investment that you own shouldn’t have too much of an impact on your overall return. If it does, diversifying might be the right choice for you, as one can also try out other commodities. I now have a balanced portfolio that is yielding me profit with help from Jonas W Herman.
That’s awesome! I’ve been contemplating hiring one since I can’t get a hang of investing even after buying courses. I’d like a discussion with him. Any means to reach him?
Hermanw jonas (a Gma!L comm
Is he taking commissions for his services? Yes, I’m I still making money in the process? Hell yes!
I started working with Jonas back in June, and my financial goals have never been clearer. It’s like having a strategic partner for my money with a solid track record.
I agree that the market can be quite unpredictable, but working with Jonas has been a game-changer for me. His market insights and strategies are consistently spot-on. It’s not just about profits; it’s also about the peace of mind that comes from knowing you’re in capable hands.
That was so helpful! Thank you!
Informative.. thanks 👍
This is an excellent, excellent explanation. Give this guy credit.
lovely video I had trouble with the topic now I have more
I have been recentlt looking for some cartoonish videos to sit down and get my kids more focused on learning about the market. I will be using this channel for now. Great video
Really well explained thanks 🎉🎉
Dude your stuff is goood ! Thanks
Really enjoyed it, was very helpful compared to other videos. 👌
Clean and simple making the explanation wonderfully clear. As you asked how do I use P/E: Contrary to popular opinion, I was taught the opposite. I was told that analysts pour over the numbers to calculate p/e and that actually a high p/e number is what the market is telling us that the company has better quality profits and the market is willing to pay a high premium for that stock. Test it out of previous stocks the numbers will tell the full story.
Interesting
great to see you comparing PE and other companies
What a great channel! Keep up the good work!
Thanks for this video.
Nicely put together! Really a fan of comparing PE and other ratios of companies from similar industries! Thanks for sharing!
As am I! Thanks for the feedback!
awesome video. thanks, liked and subscribed.
Excellent video.
OK... second video watched...new sub. Love the way you explain things and compare. Wish I found your channel earlier.
Easy to understand.tq
Thank you.
Very good!! Suscribed🙂
An underrated financial channel
hope you gain lakhs of subscribers ❤
Very good explanation
Great explanation bro, thanks!
very educational
well explained thanks, Rynance
Thank you so much
Have a vid for peg ratio? Keep up the great work!
2024! Helped me a lot! Thank so much.
excellent!
Thanks a lot
respect teaching skill
Awesome, thanks.....looking forward to more
No problem! New videos every Wednesdays and Saturdays!
Great post. thx.
Thanks bro
Thanks
Well done to understand
Another great, easy to understand explanation! Thanks for covering!
No problem! I appreciate the feedback!
Great
great explation
Thanks. Seems everyone is ignoring the PE ratio in today's stock market. Mag 7 is so overvalued
Really solid explanation! I started looking at competitors at their P/E ratios before buying stocks.
Thanks! Yeah great idea! It's really useful to compare valuations between companies!
I like the animation. You did a great of explaining the PE Ratio
Thanks so much! I appreciate the feedback!
Super interesting, definitely needed this! Keep up the good work :)
Great! Happy I could help!
Solid explanation of PE ratio. Great work
Thanks!
Very nice sharing
Thanks!
making accounting and finance easy
Such a great explanation for P/E ratio! I actually like to refer to this metric as well when looking for my dividend stocks. New sub here!!
Good stuff! Appreciated!
PE Ratio is so crucial when learning to invest! Great video, subbed and liked!
Agreed! Thanks for checking it out!
Trying to buy Bills Bike Shop on the NYSE but cant find it. Would love to own some of this before it skyrockets
You should have lots more subscriber.
LOVE YOU
What can you infer about a stock with a negative P/E ratio?
a great explanation as well
Thank you!
I have a question you say 50 or greater. I hear lots of people saying anything above 20 is bad what do you think about that ? Thank you for your videos I have learned a lot .
I've heard the the P/E is also useful to compare a company's performance over time.
Hey bro just wanted to say that your account is really undervalued, you explain these things way better than investopedia, TD or any other video I have seen. Love that you include further explanations and use cases for these metrics. Keep it GREAT 🤝
Much appreciated! Glad you enjoyed
Very helpful thanks for sharing!!
So how are NVIDIA p/e ratio constantly in high readings and stock price also continue to go strongly up through years ??
P/E ratio is hella important imo, great vid as always bro
Thanks!
Nicely explained as always!
Appreciated!
Question: today the P/E of TSLA is at 70 and Ford (F) is at 7. I believe that Tesla is a better company but as an investment Ford would be the better one. Right or wrong? TSLA at 70 still seems to be a much better investment.
It means tesla is extremely speculative. Volatile. Ford is closer to reality but also because tesla has futuristic technologies..innovative...Ford is not..low risk, low return
Ok, but the reason I’m here is because Yahoo lists forward PE and PE. What’s Forward P/E? Was a good video, thx @rynance
Is there anything wrong with the ratio being too low? 5x for example ?
Great video. New sub here!
Thanks for stopping by!
Very informative video.
Great video Thanks for sharing. 😀
Thank you for sharing!
My pleasure!
Easy understand, thank you brother.
But how to use forward P/E ratio? Is a higher Forward PE ratio than the current PE ratio a good thing?
Awesome work here. Thanks for sharing! Tesla must have a P/E that's through the roof
Yeah they do! Over 1000x!
Great breakdown and explanation. This makes it really easy to understand. Thanks so much for sharing 😀
Great explanation i enjoyed watching
Awesome! Thanks for checking it out!
What happens if the P/E is -4.5$ NIO and -11 $ xpeng but China just got chip sanction yesterday. How does PE help me decide on this similar stock
Great video idea !!!
Thanks!
Nice explanation man!
Thanks!
Inspiring people with this kind of video content is good job my friend. I am very proud of you,! Im just here to give you full support always, thank you my friend
Thanks for the support!
@@Rynance Big thanks to you my friend and i will see you always. Please stay connected,
Do you have a group comment?
I hope you correct me of i were wrong but isnt apple and amazon very different businesses?
Apple develops gadgets like iphones, wile amazon is some kind of an online platform..
Shouldnt apple rather be compared to companies like samsung or huawei?
Whats a negative pe ratio
So a company with a less P/E ratio say 10 is a better investment as a 37x ratio as you compared to McDonald’s?
With nearly half of my stock holdings in a tech stock at an all-time high, I've sold and now have around $400k. Considering potential inflation, should I invest in ETFs or wait for a market correction?
Look up dividend aristocrats. Pick six to ten from that list. Those companies have a track record of 25+ years of paying dividends. Also, its advisable you work with a financial advisor to help set up a well-structured portfolio.
Right, a lot of folks downplay the role of advisors until being burnt by their emotions, no offense. During the covid-outbreak, I needed a good boost to stay afloat, hence researched for advisors and thankfully came across one with grit. As of today, my cash reserve has yielded from $350k to nearly $1m.
Can you share details of your advisor? I want to invest my increased cash flow in stocks and alternative assets to achieve financial goals.
NICOLE DESIREE SIMON is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
What about negative P/E ratios
What does the PE value mean if it's negative? For example, Boeing's EPS is a negative number, their PE value is N/A. What does this mean?
The company is losing money. The company is not generating profits. The higher the (negative number is) -> shame on that company
Per Yahoo! Finance, a “P/E ratio of 15 doesn’t mean a whole lot unless you also know the P/E of the market as a whole, the P/E of the company’s main competitors, the company’s historical P/Es, and similar information.” Question: (A) How do you measure the “market as a whole”? (B) What does it mean when a stock has a - or N/A next to it? (C) Can you use a company’s P/E in the pharmaceutical industry to analyze?
Great vdo. Thank you.
Market price per share/basis earning per share
Wonderful to see a great video of good content. we all have to win in order to overcome recession and inflation
The stock market provides a place where companies raise capital by selling shares or shares to investors. Shares give shareholders voting rights, as well as a residual claim on corporate earnings in the form of capital gains and dividends.
But it is better to Invest in Cryptocurrencies because you earn more and better.
In my role as a financial planner, I serve clients with different income levels. But my goal is the same for everyone I know. I want to help wealthy families continue to grow wealth while helping young families achieve their financial goals. Your investment creates a safe haven for the future and helps you weather the economic crisis
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Explain MACD, RSI
Earnings per share is not the divident right?
Like #15 👍 Thanks for your continued support on my channel 🙏
Thank you too!
Good video