05-07-2013, 12:43 PM
Hi Valuebuddies,
I have some questions regarding a stock's valuation and fair price. This might have been covered elsewhere but I hope to re-initiate a thread on this topic because I think it's just as important as knowing how to find a fundamentally strong company. I'm not sure about you guys, but I have always run into situations where I really really love a company, but am not sure if I should buy in then or wait a while longer and hope that the price would go down further.
The valuation ratios that we all know- the famous P/E, P/B, NAV etc, are more often than not a blur to me, because they can never be used universally across all companies. They are also not accurate measures... so I get really confused sometimes whenever someone uses P/E to value a stock, but elsewhere someone else would say that using P/E isn't a good way. Hopefully someone can shed some light on this.
Besides the above, here are some other questions I hope you can help clarify:
1. What's the difference between P/E and PEG?
2. What other ratios/ valuation methods do you use?
3. How do you determine which ratios (i.e. pe, pb) to use for companies from the different sectors, particularly within the retail sector (which has many different industries on its own- luxury, consumer staples, restaurants) and service sectors (like Kingsmen Creatives for e.g., or Boustead)?
4. How do you know what the “ideal” P/E should be? For e.g., its always common for people to say that if a company has >10x PE, then it should be fairly priced, and also not uncommon for people to say I think the company shouldn't go beyond a PE of 10x, but on what basis do they say that? How do you determine?
I have some questions regarding a stock's valuation and fair price. This might have been covered elsewhere but I hope to re-initiate a thread on this topic because I think it's just as important as knowing how to find a fundamentally strong company. I'm not sure about you guys, but I have always run into situations where I really really love a company, but am not sure if I should buy in then or wait a while longer and hope that the price would go down further.
The valuation ratios that we all know- the famous P/E, P/B, NAV etc, are more often than not a blur to me, because they can never be used universally across all companies. They are also not accurate measures... so I get really confused sometimes whenever someone uses P/E to value a stock, but elsewhere someone else would say that using P/E isn't a good way. Hopefully someone can shed some light on this.
Besides the above, here are some other questions I hope you can help clarify:
1. What's the difference between P/E and PEG?
2. What other ratios/ valuation methods do you use?
3. How do you determine which ratios (i.e. pe, pb) to use for companies from the different sectors, particularly within the retail sector (which has many different industries on its own- luxury, consumer staples, restaurants) and service sectors (like Kingsmen Creatives for e.g., or Boustead)?
4. How do you know what the “ideal” P/E should be? For e.g., its always common for people to say that if a company has >10x PE, then it should be fairly priced, and also not uncommon for people to say I think the company shouldn't go beyond a PE of 10x, but on what basis do they say that? How do you determine?