What is price of earnings negative to show?

2022-05-11 0 By

What is price of earnings negative to show?P/E ratio is negative number to show this is deficit stock.In the stock market, it is meaningless to calculate the p/E ratio when the listed company is in loss, so the p/E ratio is negative and cannot show its amount.The net profit of the company that expresses the stock without amount when stock p/e ratio is negative number, appear on the market net profit also is negative number, mean appear on the market company management appeared a problem.If the P/E ratio is 20-30, the stock will be overvalued. If the p/E ratio is more than 30, it indicates that there is a speculative bubble in the stock. We should actually consider the industry and market, such as banks, steel and other large enterprises usually have a low P/E ratio, while emerging industries, Internet and other industries have a high P/E ratio.What are the factors that affect the intrinsic value of p/E ratio?First, dividend rate.In the numerator, the higher the dividend payout ratio, the higher the current dividend level, the higher the p/E ratio, but in the denominator, the higher the dividend payout ratio, the lower the dividend growth rate, the smaller the P/E ratio.Therefore, the relationship between p/E and dividend payout ratio is uncertain.Second, the rate of return on risk-free assets.Assets with risk-free rate of return are the opportunity cost and minimum expected rate of return of investors. The rise of risk-free rate will lead to the increase of investment return required by investors and the rise of discount rate will lead to the decline of price-earnings ratio.Therefore, the p/E ratio is negatively correlated with the return on risk-free assets.Third, the expected rate of return of market portfolio assets.The higher the expected rate of return of market portfolio assets, the greater the additional rate of return required by investors to make up for the risk of assuming higher than the average risk-free rate of return, the greater the investment rate of return required by investors, and the lower the p/E ratio.Therefore, the p/E ratio is negatively correlated with the expected return rate of market portfolio assets.