P/E and Growth Rate?
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But what does it mean when someone says the P/E is higher than a companies growth rate?
Is that the growth rate as a precentage?
P/E and Growth Rate?anthony's answer is correct, but to expand on it:
If you are trying to determine whether a stock's price is a good value, then both P/E and growth rates are important to look at.
If two stocks both have a P/E of 20, but one isn't growing very much (growth rate=10%) and one is growing well (growth=40%) then it's pretty obvious which one is the better deal.
So people often combine the two figures into the PEG ratio, which is simply the P/E figure divided by the growth percentage. The two stocks above have a PEG ratio of 2 (for the slower-grower) and 0.5 (for the fast grower). PEGs under 1.0 are normally a very good deal; PEGs over 2.0 are usually starting to look overpriced. (Of course, you should look at a number of other factors to do your due diligence.)
NOTE that the PEG ratio is just one of those 'rules-of-thumb' that are commonly used as an indicator flag. It's not really a higher-math statistic.
Note also that the PEG ratio breaks down a little bit for the extreme cases like a growth rate near zero or quite large, and of course growth rates quite often revert to the mean over time anyway.
P/E and Growth Rate?The p/e ratio is the price to earnings ratio. Stock price X earnings = p/e ratio. If the stock is selling for $50 a share and the earnings are $1 a share, then the p/e ratio is 50. The company may be growing earnings per share at a 30% rate. If the p/e is 50 and the growth rate is 30, then the company's p/e is higher than the growth rate. Yes the growth rate is a percentage.
P/E and Growth Rate?Hi, i recommand you a good and basic tutorial for investing. it covers all Issues related to your Investing and everything around it.
http://www.tutorialforyou.net/investing/
wish it will help you.
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