Wednesday 9 December 2009

Low PE stocks may have high-risk earnings or low growth.

Low PE stocks may have
  • high-risk earnings or
  • low growth. 

You could modify earnings e.g. 
  • P/Normalised Earnings 
  • P/Adjusted Earnings, or 
  • P/Cash Earnings [=P/Cash Earnings + Depreciation + Amortisation]  
Then check for Risk using
  • Beta or
  • Debt to Equity Ratio. 

 
Assess growth and eliminate
  • declining Earnings or
  • Earnings Growth lower than the sector.

 

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