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What is P/E Ratio | by Wall Street Survivor

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What is a P/E Ratio? Learn more at: https://www.wallstreetsurvivor.com/register P/E, or price-to-earnings ratio, is probably the most popular analytical tool provided in the stock quote. At a glimpse, it lets you know how the market values a company in relation to its earnings. A higher P/E ratio tends to mean that a company’s stock price is relatively expensive. A lower P/E ratio means the price is relatively inexpensive. The key word here is relatively. P/E ratio is useless on its own; it always needs to be compared, either to other companies of similar size, the company's industry, or to past performances of the same company. What you really need to know about this is that low P/E ratios suggest the stock may be under-valued, but also may have no growth prospects. Always compare a company’s P/E ratio with companies in the same industry and of the same size – A higher P/E ratio compared to the industry suggests either that the stock is overvalued or people expect bigger things from this particular company than all the others in that industry. Learn more about the P/E ratio with Wall Street Survivor's Getting Started In The Stock Market course pack:http://courses.wallstreetsurvivor.com/is/10-getting-started-in-the-stock-market/
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Text Comments (17)
gino (5 months ago)
thank you so much for the very kind and very useful explanation. The concept is quite clear to me now. What is not clear to me is why a stock with a P/E ratio of let's say 100 is preferred to one that has a P/E ratio of say 5. Moreover ... why invest in a high-P/E ratio sector ? it makes no sense to me. I would go immediately for stocks with a P/E ratio as low as possible. Thanks again gino
Caz Mmereki (1 year ago)
Thanks for the videos...really good keep em comin plz
Neil Olson (2 years ago)
So if the P/E is -3 do we get $3 of market share per $1 in?
vuyane ngwenya (1 year ago)
The only way for a P/E to be negative is if the company makes a loss , thus negative earnings, thus you are losing not gaining
1M l (3 years ago)
but the price of a stock everyday changes so it effect the p/ e ratio ?? so how we get exact p/e ratio ?
PrinceInShadow (2 years ago)
pe ratio does change. usually updated every 12 months or ttm(trailing twelve months) .
Jan Norris (3 years ago)
Not following. Must be a way to make this simpler & easier to understand.
Matt George (1 year ago)
no, this channel is hands down the easiest to understand and follow. Perhaps this is not the best video to start on for a novice though?
Wall Street Survivor (3 years ago)
+Jan Norris Hey Jan. Though we do our best, it's definitely a bit tricky to explain a concept like P/E ratios in a 1-2 minute long video! We offer a free course "The Value of a Stock" where we also explain the power of the P/E ratio. Feel free to check it out, Jan: http://bit.ly/1pqi5Z4
waysoflife88 (3 years ago)
I look at P/E's as bubble indicators. Anything over 20 is in a bubble.
Vamsi Allavarapu (1 year ago)
How come? care to elaborate?
Clint C (4 years ago)
Why do you guys say that Toolhut is undervalued? Couldn't it also be possible that they are over-valuing Tim tool shed since its P/E is higher?
Jonky Dawson (5 years ago)
Thank you!!   Easy to follow.
dodgersfan1 (5 years ago)
blabla (6 years ago)
Wall Street Survivor (6 years ago)
Thanks @mrsonibros! We should chat - email me at ryan (a) wallstreetsurvivor {dot} com
Soni Bros (6 years ago)
great video! examples were great! if you have the time, make sure you check out my channel! keep it up WallStSurvivor!

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