P/E ratio is one of the most commonly used indicators to evaluate whether the stock price level is reasonable. Divide the stock price by the annual earnings per share (the market value of a company divided by the annual profits attributable to shareholders can also get the same result).
When calculating, the stock price usually takes the latest closing price, and if EPS is calculated according to the published EPS of the previous year, it is called historical price-earnings ratio; Generally, consensus estimation is used to calculate the estimated P/E ratio, that is, the estimated average or median value obtained by the institutions that track the company's performance after collecting the forecasts of many analysts. What is a reasonable price-earnings ratio, there is no certain standard.
Price/book value
PB, whose Chinese name is average price-to-book ratio, is one of the most common reference indicators in the basic analysis of stock investment, just like P/E ratio, marketing rate and discounted cash flow.
Average price-to-book ratio = share price/book value. Among them, book value = total assets-intangible assets-liabilities-preferred stock equity. It can be seen that the so-called book value is the value of the company when it is dissolved and liquidated.
If a company wants to liquidate, it must pay its debts first, and intangible assets will no longer exist. One of the key points of preferred stock is to divide the money first in liquidation, but there is no preferred stock in this stock market. In this way, if the book value is converted into net assets per share, PB is the price-to-book ratio that everyone understands, that is, PB (price-to-book ratio) = share price/net assets per share.
Return on common shareholders' equity
ROE is return on equity, also known as return on shareholders' equity/return on equity/return on equity/return on equity. It is the percentage of net profit and average shareholders' equity, and it is the percentage rate obtained by dividing the company's after-tax profit by its net assets. This index reflects the income level of shareholders' equity and is used to measure the efficiency of the company's use of its own capital.
The higher the index value, the higher the return on investment. This indicator reflects the ability of self-owned capital to obtain net income.
The calculation method of ROE is: ROE = after-tax profit/owner's equity.
According to Notice No.9 of the Rules for Information Disclosure and Compilation of Public Securities Companies issued by China Securities Regulatory Commission, the formula for calculating the weighted average return on equity (ROE) is: ROE = P/(E0+NP ÷ 2+EI× MI ÷ M0-EJ× MJ ÷ M0).
These include:
P is the profit during the reporting period;
NP is the net profit during the reporting period;
E0 is the initial net assets;
Ei refers to new net assets such as issuing new shares or debt-to-equity swaps during the reporting period;
Ej reduced its net assets for repurchase or cash dividends during the reporting period;
M0 is the number of months in the reporting period;
Mi refers to the number of months from the following year 1 month to the end of the reporting period;
Mj is the number of months from the following year 1 month to the end of the reporting period.
Discounted cash flow method
Absolute valuation method DCF:DCF is a rigorous valuation method and an absolute pricing method. To get an accurate DCF value, you need to have a clear understanding of the future development of the company. The process of obtaining DCF value is the process of judging the future development of the company, so the process of DCF valuation is also very important.
References:
PE- Baidu encyclopedia
PB- Baidu encyclopedia
ROE- Baidu encyclopedia