6.2 Lecture_12_Thursday_20_August

Pe and mb are high if roe is high risk is low 30 30

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Unformatted text preview: arket − to − Book Ratio = Market Price per share = = 29 29 P/E P/CF M/B 2009 12.0x 8.21x 1.96x 2008 -0.4x -0.6x 1.7x 2007 9.7x 8.0x 1.3x Ind. 14.2x 11.0x 2.4x • • P/E: How much investors will pay for $1 of earnings. High is good. P/CF: How much investors will pay for $1 of cash flow. ___________________________ • • M/B: How much paid for $1 of BV. Higher is better. P/E and M/B are high if ROE is high, risk is low. 30 30 Typical industry average P/E ratios C2000 or 2001 Industry P/E ratio Banking 17.15 Computer Software Services 33.01 Drug 41.81 Electric Utilities (Eastern U.S.) 19.40 Internet Services* 290.35 Semiconductors 78.41 Steel 12.71 Tobacco 11.59 Water Utilities 21.84 * Because many internet companies have negative earnings and no P/E, there was only a s...
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This note was uploaded on 12/23/2009 for the course BCOM FINC 202 taught by Professor Warwickanderson during the Spring '09 term at Canterbury.

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