Opentrain Share Tips
Price/Earnings Ratio
Word of caution. Low PE ratios can also be a sign of trouble. Companies whose share prices are a small multiple of their profits are usually poorly rated for good reason. Still, provided you have patience and are prepared to scan their financial statements and annual report, these shares are always the best place to find value.
At the other end of the scale, excessively high PE ratios can also indicate a problem, although in boom times, few heed them. No matter how great their prospects are supposed to be, try not to purchase a share that you would have to wait wait more than a lifetime to get back your money.
When starting out look for shares with a P/E ratio of about 6. Try to avoid caompanies with a P/R ratio of more than 15, as you will more than likely end up waiting more than a decade to see the return on your capital invested.
Introduction tutorial for the individual self-investor. Useful hints and tips beginning your first venture into trusts / shares.
www.opentrain.co.uk/sharetips. Share tips, share tutorials, introduction to investing in shares and funds