Learn about price earning multiple for Finance for Non-Finance executives. Easy to understand video by your own Finance Guru.
Ladies and gentlemen boys and girls welcome back to finance tube this is your friend vishal tucker guiding you with the most important concepts in finance today’s conceptual discussion revolves around the most important concept called price earning multiple price earning multiple is very critical when we talk of financial projections friends in valuation whenever
We talk about the future of the company there is a very intelligent animal called equity research analyst who tries and meets the management of the company tries and analyze the future of the industry looks at the future of the economy and conducts what we generally called as gic analysis economic industry company analysis to arrive at financial projections of the
Company based on his research and understanding he makes the five years profit and loss account the five years balance sheet and five years cash flow statements for a particular company in consideration in future these financial projections they give out profits of future five years and based on those future profits which are generally projected as an increasing
Trend what they do is they recommend whether to buy this stock at current price or no so happens is that as you see an increasing trend and profit let’s say for example this year’s profit is hundred crore next year 120 crore then 150 then 200 then 240 and 300 and then 350 we see there is a trend which is rising now if you purchase a particular stock in the current
Year at today’s price your purchase price becomes constant however the earnings of your company keeps on increasing in future that means the price earning multiple after you purchase a particular stock if the profit has increasing trend the price earning multiple will have decreasing trend because price remaining the same price earning multiple is very simply
Defined as price upon our means so price remaining the same if the denominator it’s on increasing your answer will keep on decreasing that’s mathematics so what happens is that an analyst will tell you that hey this company is available at a 12-month trailing p/e of 10 for 2020 what basically he is trying to tell you is that in 2020 if the current year’s profit
Is hundred crores the profit then would be 350 crores and if you have purchased the stock at current price then five years later definitely the price of this stock will go up because increase in profit and increasing share price have a positive correlation in the long run so you see ladies and gentlemen prai’s earning multiple in financial projections or future of
The company plays a very important role so before you buy a stock you read my equity research reports published by these analysts do go through the details of financial projections to carefully study the decreasing pe and the increasing profits and once you have conviction on what he is saying buy the stock and please take only as much quantity which is within
Your budget we all know that people from non finance background struggle to manage their finances they hit the reality when they get their first paycheck and from then on they are all by themselves to manage their money on their own for lifetime it’s like asking you to fly a plane without any formal training it’s very risky so our endeavor through our books our
Videos and all other mediums to educate you financially so that you don’t outsource managing your own finances to somebody else and suffer because of inefficiencies of other people some of the best sellers and fourth position on the best seller list finance for non-violence for more such videos credit rating balance sheet cash flow projections be multiples don’t
Forget to subscribe to our channel finance tube challenge comes that the difference between two crores and one crores that is one crore which is your gain or profit from selling the house is taxable and is taxable at flip
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What Is Price Earning Multiple? Finance for Non-Finance Executives By Finance Tube