What is P/E ratio & how’s help to pick good stock?

MarketMantra — Sat, 30 Jun 2018 19:07:23 +0000

Price to earning ratio(P/E) is ratio which can calculate by company current share price divided by company earning per share(EPS).

Formula to calculate P/E Ratio: P/E Ratio = Company stock current market price / Earning per share

Example: Suppose current market price is Rs. 250 and Earning per share is Rs. 10, PE ratio will Rs.25.

How does P/E ratio help?

PE ratio is most widely used tools to pick good valuable stock. It’s give an idea to investor that what market are billing to pay of company’s earnings.

How P/E ratio describe to company share:

P/E ratio is high that means market are bullish on stock and except company earnings growth increase in future. Higher PE ratio stock can introduce as overpriced in some cases. overpriced means stock price is much higher compare to its real potential growth.

P/E ratio is low that means market are bearish on stock and except company earnings growth decrease. low P/E ratio stock can describe as undervalued. undervalued means market don’t know about the stock real potential growth.

Drawbacks of P/E ratio:

P/E ratio is mostly dependent on comparison of the company with its peers company. Also In some sectors P/E ratio can considered as very high while in some sectors can considered as very low.

For Example, companies in Telecom and Information Technology sectors have higher P/E ratio than the companies in Auto, manufacturing or pharmacy sectors.

The post What is P/E ratio & how’s help to pick good stock? appeared first on Market Mantra.

How to Choose Good Companies Stocks?

MarketMantra — Fri, 22 Jun 2018 14:03:12 +0000

There is approx 6,000 companies publicly traded in Indian stock markets and it’s very difficult to choose good companies for investing because lots companies traded here which are not having good amount growth due to facing lots of issues, having lots of Dept., Product of Companies not performing well. so that we always try to avoid these type of companies for investing.

What points keep in mind to select good company stock?

1. Do research and create a list of Strong Fundamental Companies : Before investing we should create a list of good fundamental companies and select companies from list for investment. Investor should review at least some basic below mention criteria to select good fundamental companies.

a. P/E ratio
b. EPS growth
c. Book values
d. Dept. on company

2. Buy stock on reasonable price : Before investing in company stock we should keep in mind that we are not going pay over price. mostly buyer do the same mistake and buy the stocks on over price, after sometimes they feel that they choose wrong company stock because stock price is not increasing any more while problem was not in stock, problem was to pay over price for the stock.

3. Investing in low-priced script not always profitable : This is not a good idea to invest in low price stock..before investing investor should always see the company performance not stock price. This is very common mistake done by new investors they see that price of stock is running on low price so they want to buy lots of quantities of stock without see company performance.

4. Avoid feeling greedy : If investor did good research then they don’t need to feel greedy if company stock is not performing well because no one can predict in stock market that what is right time to stock start performing well.

5. Follow own rules strictly don’t make : In a stock market is most mandatory things is keep passions and follow all the rule very strictly don’t miss up any emotions with the rules..otherwise it may convert in a loss for you.