Is P/E ratio a useful stock valuation measure?
by Michael Zhuang - gurufocus.com
Warren Buffet said: “Price is what you pay and value is what you get.” Wall Street uses the price-to-earning ratio, or the P/E ratio in short, to determine whether one gets what one pays for when buying a stock. Is this ratio just a myth? Or is it a useful valuation measure?
To answer this question, I examined the whole stock market data for the past 50 years from 1958 to 2007. For each year, I separated stocks into three portfolios: the top 30% P/E portfolio, the middle 40% P/E portfolio and the bottom 30% P/E portfolio. (Stocks with negative earnings are all in the top 30% P/E portfolio.)
Click here for the full article.
the link to the full article is broken
naam
5 Jul 08 at 9:59 pm
link rectified!
toughiee
6 Jul 08 at 6:07 pm
Link working but article is not there….
Harsh
10 Jul 08 at 11:20 am