{"id":3672,"date":"2021-10-25T02:00:19","date_gmt":"2021-10-25T02:00:19","guid":{"rendered":"https:\/\/elmads.com\/?p=3672"},"modified":"2021-12-20T14:57:45","modified_gmt":"2021-12-20T14:57:45","slug":"relative-valuation-the-price-to-earnings-ratio-part-1","status":"publish","type":"post","link":"https:\/\/elmads.com\/?p=3672","title":{"rendered":"Relative Valuation – The Price-to-Earnings Ratio “Part 1”"},"content":{"rendered":"\n
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By elmads<\/p>\n\n\n\n

Stocks and Shares are portions of ownership in a company. What we actually have in this ownership is the rights to a company\u2019s earnings. When a company is profitable so as our investment with them. Henceforth, we receive dividend income and\/or price appreciation of the company’s stock price.<\/p>\n\n\n\n

Nevertheless investing is not just about that, because the price level we pay on an investment is also a significant contributor on our returns. This is where valuations come in, it is an estimation of a worth of a company stock based on their actual business earnings.<\/p>\n\n\n\n

Take note that the stock price doesn\u2019t completely reflect a company\u2019s current earnings and performance. Price is different from value, if you are a stock price focused person, then most of the time you\u2019ll not bother about the underlying company\u2019s business operations, performance and future plans of growth. Whereas, the value type of investors are focused on the company itself rather than the price.<\/p>\n\n\n\n

There are various and different valuation methods that we can do, but the fastest and easiest way is to do relative valuations. It is knowing if a company is cheap, fairly priced or overpriced compared to its peers within the industry and also from the company\u2019s past and future performance.<\/p>\n\n\n\n

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