Some individual stock PEs 822014 Stock Price earnings per share X PE multiple

Some individual stock pes 822014 stock price earnings

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Some individual stock P/E’s (8/2/2014) Stock Price = earnings per share X P/E multiple Amazon 806 Electronic Arts 148 Netflix 127 Google & Yahoo sell at 30x , Microsoft and Apple both sell at a16x P&G and Campbell’s Soup sell at 20x Exxon sells at 12, but Royal Dutch Shell at 20 BestBuy and Alaska Air have P/E’s of 10
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What Drives P/E ratios? Expected Future GROWTH A stock’s P/E ratio is literally the amount that the market is currently paying for current earnings, it is the price paid for a dollar of current (or one year forward) earnings . Why would the market pay more for one firm’s earnings than another firm’s earnings? EXPECTED FUTURE GROWTH
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32 Share Value and the Value of Growth Value of no growth firm Plowback rate = 0 Dividend Payout rate = 100% Dividends = Earnings g = 0 Value of growth embedded in firm value (or share price) can be identified with the following construct: E E r E g r D V 1 1 0 PVGO today) price (share ies Opportunit Growth of Value Present 1 0 1 1 0 E E E r EPS P or r E g r D V
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33 Deriving the P/E ratio from the Value = No-Growth Value + PVGO expression E E E E E /r , P/E when PVGO r E PVGO r E P ce) stock pri when P EPS (where E E PVGO r E P PVGO r EPS P on RHS E r distribute E or EPS, h sides by divide bot 1 0 1 1 1 1 1 0 1 1 0 1 0 1
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34 The P/E Ratio and Earnings Growth (g) ES by MULTIPL 1 Ratio 0 as ; 1 Ratio 0 if Value of Portion Growth - No Current Value of Portion Growth 1 1 0 1 0 0 1 1 1 0 E E E E E E r E P PVGO r E P r E P PVGO r E PVGO r E PVGO r E P
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