PER is known as one of the most important indicators in the capital market. The official definition about is a ratio that describes how the company's profits or stock issuer (the company's earnings) of the share price (stock price).
The calculation of the ratio P / E or PER is done by dividing the current share price (current price of the stock) with an annual profit per share (annual earnings per share EPS).
For example, issuers have the ABCD stock net profit per share (earnings per share) amounting to 200, with a current share price of Rp2,000 per share, then the PER ABCD is 10. This means that if we invest today in the shares of ABCD, the future capital returns substantially ( payback period) was approximately 10 years.
Why is that? That's because we buy the stock with 10 times the net income per share (EPS) assuming inflation of 0% and ABCD has a fixed profit rate of 200 per share.
To obtain the level of stock returns (returns), then simply calculated by 1 / PER alone, for example the yield ABCD is 1/10, which is 10% per year.
Then we compare the market return, if the stock return is higher than the market return, it is worth buying shares and vice versa. PER also can be used to compare performance between stocks or between sectors and even between markets in regional or global scale.
PER is also a psychological number of values in which the PER small investors will be more attractive than the high PER. This low PER due to the earnings per share is relatively high compared to the price of the shares, so that the level of its better return and payback period is shorter again. PER small is one of the main considerations for value investing alongside other factors.
Then the stock PER PER higher than the market are not good for long-term investment, but it can be done for short-run or trading with technical considerations alone. A smart investor will avoid stocks with high PER, let alone share it has high volatility that has a higher risk potential.
At the moment in which the stock price fell, the stock plummeted drastically PER almost amounted to an average of 60% and PER market is under 10, then this is a strong signal to start the investment value as the momentum of the economic crisis.
Even some leading stocks have reached PER under 5. For this momentum investors value a long-term investment opportunities.
May be useful, congratulations to invest ...
The calculation of the ratio P / E or PER is done by dividing the current share price (current price of the stock) with an annual profit per share (annual earnings per share EPS).
For example, issuers have the ABCD stock net profit per share (earnings per share) amounting to 200, with a current share price of Rp2,000 per share, then the PER ABCD is 10. This means that if we invest today in the shares of ABCD, the future capital returns substantially ( payback period) was approximately 10 years.
Why is that? That's because we buy the stock with 10 times the net income per share (EPS) assuming inflation of 0% and ABCD has a fixed profit rate of 200 per share.
To obtain the level of stock returns (returns), then simply calculated by 1 / PER alone, for example the yield ABCD is 1/10, which is 10% per year.
Then we compare the market return, if the stock return is higher than the market return, it is worth buying shares and vice versa. PER also can be used to compare performance between stocks or between sectors and even between markets in regional or global scale.
PER is also a psychological number of values in which the PER small investors will be more attractive than the high PER. This low PER due to the earnings per share is relatively high compared to the price of the shares, so that the level of its better return and payback period is shorter again. PER small is one of the main considerations for value investing alongside other factors.
Then the stock PER PER higher than the market are not good for long-term investment, but it can be done for short-run or trading with technical considerations alone. A smart investor will avoid stocks with high PER, let alone share it has high volatility that has a higher risk potential.
At the moment in which the stock price fell, the stock plummeted drastically PER almost amounted to an average of 60% and PER market is under 10, then this is a strong signal to start the investment value as the momentum of the economic crisis.
Even some leading stocks have reached PER under 5. For this momentum investors value a long-term investment opportunities.
May be useful, congratulations to invest ...
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