What is the static P / E ratio?

Static P / E ratio is widely talked about in the market, that is, the ratio of the current market price divided by the known latest public earnings per share. Price to earnings ratio (PE or P / eratio) is an important index to reflect stock returns and risks, also known as price earnings rate. It reflects how much money an enterprise has to spend to recover its costs according to the current profit level. This value is usually considered to be a reasonable range between 10 and 20.

The P / E ratio is the current market price per share divided by the after tax profit per share of the company, and its calculation formula is as follows:
P / E ratio = market price per share / after tax profit per share, that is, P / E ratio = share price / earnings per share
In the daily quotation table of Shanghai Stock Exchange, the price earnings ratio is calculated by using the closing price of the current day. The ratio of the after tax profit per share of the previous year is called the price earnings ratio I, and the comparison with the predicted value of the after tax profit per share of the current year is called the price earnings ratio II. However, as listed companies in Hong Kong do not require profit forecasts, the A-shares in the H-share sector have only the P / E ratio I. Therefore, the general sense of the P / E ratio refers to the P / E ratio I.
Application significance of static P / E ratio
Generally speaking, the P / E ratio indicates how many years the company needs to accumulate in order to reach the current market price level. Therefore, the lower the P / E ratio is, the better the smaller the value is. The shorter the payback period is, the smaller the risk is, and the higher the investment value is generally. A higher multiple means a longer period of capital recovery and greater risk. In the 100 years from 1891 to 1991 in the United States, the P / E ratio was generally 10-20 times, while in Japan it was 60-70 times. In China, there were thousands of times of individual stocks, but now they are about 20-30 times.
It must be noted that the observation of P / E ratio can not be absolute, only rely on one indicator to draw a conclusion. This is because the after tax profit of the previous year in the P / E ratio can not reflect the current business situation of the listed company; the forecast value of that year lacks reliability. For example, many listed companies apologized to the majority of shareholders for the high profit forecast value of the company in public this year; in addition, countries in different stages of market development have different evaluation standards. Therefore, the price earnings ratio index and the stock market table provide only first-hand real data. For investors, what is more needed is to give full play to their intelligence, constantly research and innovate analytical methods, and combine basic analysis with technical analysis, so as to make correct and timely decisions.
Using different data to calculate the P / E ratio has different significance. The current P / E ratio is calculated based on the earnings per share of the past four quarters, while the predicted P / E ratio can be calculated by using the earnings of the past four quarters or the sum of the actual earnings of the last two quarters and the predicted earnings of the next two quarters. The calculation of P / E ratio only includes common stock, not preferred stock.
The widely talked about P / E ratio in the market usually refers to the static P / E ratio, that is, the ratio of the current market price divided by the known latest public earnings per share. However, as we all know, the Earnings Disclosure of Listed Companies in China is still semi annual, and the annual reports are mainly published two to three months after the end of the disclosed operating period. This has brought many blind spots and misunderstandings to investors' decision-making.

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