What is P/E Ratio

Have you heard of P/E (Price/Earnings Ratio)? It is one of the Oldest and most used term when it comes to value of shares. And you know although i heard it several times and also knew what it meant but was never able to figure out how to use it to find out the value of the shares that i was planning to buy.

Any ways i have found some useful information on Price/earning ratio which i am planning to put to good use now. It actually means ratio of the price of a share by the earnings per share. All you need to do to find out the P/E ratio is to divide the price of the stock by the Earnings per Share(EPS). The earning per share is usually for the past four quarters.

Whenever a company is making losses the P/E ratio is negative or sometimes said to be zero. Price/earning ratio tells us how much an investor is willing to pay for the per rupee earning of the share. For example a P/E ratio of 18, the investor is willing to pay Rs.30/- for every 1 Re. earning that the company generates. If a company has a higher P/E ratio it means that the market is generally expecting a good growth in the companies earnings. Stock prices reflect, what the market expects the companies growth to be.

Lets take an example, if everything else being equal and a stock worth Rs.10/- and a P/E ratio of 75 is probably more expensive then a Rs.100/- stock with a Price/earning ratio of 20. Hence we can say that the P/E ratio is much better indicator of the value of the stock then its market price.
Price/Earning ratio is usually lower during the times of inflation. You should never base your buy or sell decisions solely on this ratio.

I have tried to explain in a way i can and the way i found it but is case of any doubts please do get in touch.

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Cash or Finance for buying a Car

Thinking of buying a new Car, Cant make up your mind whether to get it financed or pay by cash for the entire car, cash which is lying in fixed deposits/mutual funds/wherever....

Well to anyone casually looking would suggest that paying by cash would have been a better option, the smart thing to do, this way you wont have to pay the interest. So if your car costs Rs. XX/-, you will end up paying Rs. xx/- and the cars yours. But why do people forget that the worth of money is much more to you today then it will be after 3 years or maybe even 5 years. And What about the earning potential of the money that is lying in your bank.

Lets See how this works out if you pay cash...
  • Cash paid: Rs. 400000/-
  • Car loan interest costs: Rs. 0/-
  • Interest lost on cash (48 months @ 9% interest on FD): Rs. 144000/- ( Maybe even more if you invest in Stocks or some other form of investment like property)
  • Total cost of the car: Rs. 544000/-
Lets Now See if you were to get the car financed

  • Cash paid: Rs. 0/-
  • Car loan interest costs @11%: Rs. 176000/-
  • Interest earned on cash (48 months @ 9% interest on FD): Rs. 144000/- ( Maybe even more if you invest in Stocks or some other form of investment like property)
  • Total cost of the car: Rs. 432000/-
First thing i know everyones asking is that why cash paid is being considered as zero, well i am assuming that cost of the car is Rs. 500000/- And that you have to pay One Lakh additional in each case. Especially 1 lakh as down payment in the last case.

Anyways i guess you are getting my point, but then some people would dispute the above by, that paying cash has some psychological advantages, like not worrying about the constant debt, monthly EMI and the likes. But i guess its more of a point of view.

There is of course a flaw in the above calculation but i really didn't want to mention it earlier but the thing is that the entire amount of Rs. 400000/- should be available for the entire period for earning the interest but then we haven't taken the Compounding of interest either so i guess we should be even.

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Some Good Stocks

In continuation, with my last post on best stocks if we see th over all prospective, and the way the market is headed south, it is a good opportunity to invest in some really good stocks. Some Stocks which can give returns if kept over a long time, atleast i feel these are really good stocks.
But please as a disclaimer don't take my word for it please do be careful while investing and let me also know what you think...


1. Reliance Petroleum : One stock which is definitely give some really good results in the near future with its refinery coming up.


2. Tata Steel : Corus aquisition and low cost producer makes it a very good pick in the steel industry and probably will give better results although a little down nowadays.


3. DLF : Its a bog name in real estate and some really good projects under its belt. So lets hope for the best.


4. ICICI Bank : Its got a great model and is taking advantage of the Goverment banks shortcomings, it has the greatest reach among all other banks and my salary is deposited every month in it so its certainly a good bank.

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Life's Goals

Have you ever wondered what your real goals in life are? What are your priorities in life?

Well these are important questions one should ask himself/herself. Frankly when ever this question is put to me i would probably answer..

1. Find the highest paying job. Work long hours(which i already am working and i guess all of us are) but still work just for the money.
2. Live a lifestyle like a ancient warrior, with as little luxury as i can always just thinking about money.
3. If i am still alive by the time i am 65, suddenly retire one day, stop working and try to enjoy life or whatever is left of it.

Are these your goals as well, are you thinking otherwise. I have now started to believe it should be something else....

1. Try to find a job that you love. We shouldn't work at a place where we even dread getting out of bed every weekday. Maybe its difficult, Maybe you might have to take some risks but do something you enjoy. I have been thinking for so long to do the same but have never been able to draw up the courage to do so. But now i am planning to take a dive and lets see what happens.

2. Try to do less work and start getting more of a life. Start playing with your kids. Try to get involved in there upbringing. Start writing a blog like i have done, just to pass time. Maybe do something for the community. Don't end up looking back at your life and just remember working for all your life and never just living it.

3. Retirement : Retire doesn't necessarily means at the age of 65, i have not put any date on my retirement. i just want to make it one day. And retirement for me doesnt mean just sitting at home and taking care of grandkids. It means something more like working for who i want and when i want and enjoying life with it.

You are probably thinking why this kind of an article on a money blog. Well i just wanted to tell everybody that not everything we do should be for money only it should also be about life. About living the way we want to live. So please LIVE LIFE NOT WORK LIFE

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Best Stocks

The top stocks and the kind of stocks to retire with or just save for your child's future according to a research conducted by rediff are some names that normally a person like you and me couldn't even start to pin point are not infosys or reliance but some other names :

1. ITC : Advantages
a. Strong Brand
b. Huge Distribution Network.
c. Profitable Business
d. Diversification Underway.

This stock could do wonders and i am just getting into this one for the long run. Its got an advantage that its cash cow business i.e cigarettes, it has 75% market share and very little opportunity for new players to enter.

2. ZEE Tele Films : Advantages
a. Strong Distribution Network
b. Its Subscription revenue is rising
c. Better ground with Advertisers
d. Good Margins
e. Brand loyalty

Its bit costlier stock but if revenues do pick up its one stock that you would want to have in your portfolio as a top Stock.

3. Pantaloon Retail : Advantages
a. Biggest retail Chain
b. Very Popular retailing Chains
c. Major Diversification Underway.

Retail stocks are always given a step child kind of a treatment in the Stock Market. The best part is as they open more branches their brand recognition increases and also since they have the early starter.

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How to Invest in the Stock Market

Or Should i say what not to do while investing in stock market's.....

There are some common mistakes that individual investors like myself always tend to do while investing in the stock market and as i did once, i dont want anyone else doing the same. So here are a few points to be careful about.

1. Some stock brokers talk about "TIMING", buy low and sell high, its not possible to predict the market so accurately, so its best to stop trying to. Someone you know might have made some money out of this technique but in the long run it could give you losses.

2. Don't try to be a "FOLLOWER", Don't "COPY" someone, just because someone you know from somewhere made some money on some stock he bought cheap, it doesn't mean you will be able to replicate the same performance. If you don't know how to do it just don't do it.

3. Don't invest everything in One stock, be careful, do your research, get to know the company before actually making an investment in it. It would be foolish to invest all the money in one stock. You might win some but then you ave an equal chance of losing everything.

4. "TIPS", stay absolutely clear of them, just dont invest cause someone tipped you about some stock, it could be for any reason maybe some broker trying to increase the price by word of mouth so that he can sell of his stocks. Its risky and not worth the effort.

5. "OBSCURE" Stocks are stocks which no one has noticed, and if you decide on investing in them just for the reason of them being obscure, it would be foolish. There probably is a reason for them being obscure. so be careful.

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Income Tax Calculation Form

For all those people who have started to worry about their Income tax, about how much to pay, how to calculate and the likes i am herewith attaching a IT calculation sheet that i found, it is usefull and works in Excel so even more beneficial.

Here's the Link....

So now Calculate your income tax and start to buy all those ELSS, LIC, FD's and the likes to save your money.