What Is A Good P E Ratio For Cryptocurrency

What is a good p e ratio for cryptocurrency

The price to earnings ratio, or P/E ratio, is a common valuation method for determining whether a stock is overvalued or undervalued.

Price to earnings ratio indicates the amount of money per share an investor is willing to pay today for a dollar of future earnings.

For instance, if Amazon was selling for $18.00 per share today and the company had $1.00 of earnings per share over the prior year, it would be trading at a P/E of 18.

This means an investor would be willing to pay 18 x $1.00 just to own the stock.

The P/E ratio can be an objective method for evaluating stocks…

However, P/E ratios by themselves do not necessarily indicate whether a stock should be bought or sold.

What is a good p e ratio for cryptocurrency

Other factors that affect whether people buy or sell stocks include, but are not limited to:

  1. Perception and stories
  2. Dividend yield (if any)
  3. Price to sales ratio
  4. Return on equity
  5. Return on assets
  6. Market capitalization
  7. Debt to equity ratio
  8. Return on invested capital
  9. Technological and economic industry trends
  10. Recent market behavior (such as irrational exuberance or pessimism)

People often tell themselves stories (#1) about whether to buy or sell a stock, then use the other factors (#2-10) to rationalize their decision after it is already made.

However, out of all of the above, the price to earnings ratio is perhaps the most well-known.

P/E ratios often vary by company industry, business model and the stage a company is in its lifecycle.

For instance, you should not compare the P/E ratio of a logging company to that of a technology company.

Also, people often mistakenly assume that older, more established companies should have more modest (i.e.

What is a good p e ratio for cryptocurrency

lower) P/E ratios and that younger companies and startups should have higher ones…

But this is only a guideline and may not hold true at all for many companies.

Apple and Microsoft are both about the same age and are both technology companies… However, Microsoft trades at a P/E ratio of 27 while Apple has a P/E of 18.

How Do You Calculate A P/E Ratio?

The P/E ratio can be calculated by dividing the price of a share of stock by the company’s annual earnings per share.

Stock analysts often use “trailing” earnings per share when calculating the current quarterly results of a public company.

What is Apple’s P/E Ratio?

Let’s use Apple stock as an example.

On Thursday August 2nd, 2018 Apple (Nasdaq: AAPL) reached $1 trillion dollars in market capitalization.

This occurrence has caused some people to believe that Apple is extremely overvalued… Maybe it’s to be expected that people would think this, just because $1 trillion is a huge number.

However, look at Apple’s P/E as listed on Google Finance from today.

The stock closed at $209.07 and its P/E ratio is listed at 18.14.

Is this a “good” price to earnings ratio…?

What is a good p e ratio for cryptocurrency

Or is it too high? Too low?

The chart below from Zacks shows the trailing earnings per share for AAPL.

To determine whether Apple’s stock has a high, low or Goldilocks (i.e.

“just right”) P/E we need to look at the price to earnings ratio of Apple and also at the historical trends for the stock market as a whole.

We also need to examine what the stock market “experts” think.

Experts at FactSet believe that the S&P 500 is fairly valued at a forward P/E of slightly over 16.

However, interest rates also play a role in P/E ratios.

In environments like ours where interest rates are between 2-6% research firm FactSet suggests that, at 18.14, Apple’s P/E ratio is exactly where the historical 10 Year trailing P/E ratio should be.

This suggests that even at $1 trillion, Apple is quite reasonable.

Warren Buffett thinks Apple has a very reasonable P/E ratio because he’s backing up the truck on Apple stock, even as AAPL hits new highs…

What do you think about the P/E ratios of tech stocks and the stock market today?

What is Bitcoin NVT Ratio/NVT Signal? P/E Ratio for Bitcoin.