Q: Hi 5i Team - Price per Earnings and forward P/E is often used as a measure of valuation for a stock. Also I am assuming that when someone talks of a company trading at 20 times earnings they are referring to this ratio. However I have never been completely sure about what this means. Does earnings mean EBITA. Could you elaborate on the exact meaning of earnings.
Secondly is this the best measure of a company's success, at least for investment purposes, or is there another metric (or more) that gives a better insight into the valuation of a company.
I've never seen a price per profit ratio so here's the third part of this question. Does something like this exist or is there a similar ratio that would help in evaluating a company's performance.
Thank you.
Secondly is this the best measure of a company's success, at least for investment purposes, or is there another metric (or more) that gives a better insight into the valuation of a company.
I've never seen a price per profit ratio so here's the third part of this question. Does something like this exist or is there a similar ratio that would help in evaluating a company's performance.
Thank you.
5i Research Answer:
There is debate on which metric is 'best'. Many like price/cash flow, as earnings often will...