P/E Ratio

Today interest group talking about P/E ratio

how are we going to use the P/E ration to determine the future share price

although is expectation but is far more accurate than other stock valuation methods

P/E ratio = Price / Earnings per share

at first we must determine what is the highest and the lowest P/E ratio for the company

and the we must get the industry P/E to determine the benchmark compare with the P/E of the company

let's say lowest 4 highest 10

we must know the EPS of the company as in quarterly

and also their previous EPS

so that we can estimate what is their estimated future EPS

base on historical date and also market outlook of the company

whether he is in boom market or any catalyst that affect him

Let's say

Qtr 1 EPS = 2

Qtr 2 EPS = 3

Qtr 3 EPS = 3.5

Qtr 4 EPS = 2

Base on historical data show that Qtr 2 and Qtr 3 will be high EPS

therefore when we forecast future

Given the Qtr 1 EPS of future is 2.5

seems increase

so the estimated

Qtr 2 EPS of future will be 3.5

Qtr 3 EPS of future will be 4

and Qtr 4 of EPS of future will be 2.5

all these base on self estimation

to be more accurate is better to ensure the market outlook and the news of the company

it might decrease instead of increase

Base on the estimated EPS to determine the price of company in the future

Let's say estimated EPS 2.5

then times with the lowest and highest P/E

lowest= 10 highest = 20.5

this is the price range in the future since P/E times EPS = Price of the share

so if the amount of share now is 21 it is overvalued better not buy it so fast

if the amount is below 10 it is undervalued so we can invest in the company

I hope what I'm sharing here is correct

any correction please do comment

thank you guys

happy always