About Art Young Expertise So your investigating a company you`d like to invest in, but you`re not sure what the financial statements are telling you? Then we can work together to help you understand the Balance Sheet, Income Statement and Statement of Cash Flows so you can evaluate the businesses current financial position.
Experience I hold an MBA and have applied my strategies to my own portfolio with great success.
Organizations American Association of Individual Investors
Publications www.mmzero-llc.com/fp
Education/Credentials BS Mechanical Engineering
Master of Business Administration
Expert: Art Young Date: 2/8/2001 Subject: calculating past avg. P/E, ROE
Question hello, Art..
i know this is an easy one, but has me stopped cold. when calculating past performance of a company, say the avg. P/E for the last 5 years..how do i do treat the (-) negative EPS given for a single year for the P/E of that year? Is it as simple as placing the (-) in front of the answer? say a (.31) EPS is given for a $14.625 price...is the P/E -47.18?
Any help you could give me would be greatly appreciated...thank you. Jim
Answer Hi Jim,
Most services that report P/E don't calculate a negative P/E, they just report something like "negative earnings" or "not calculable." Take it to the lowest level, P/E identifies how much an investor must pay for a dollar of a company's earnings. If the company has no earnings, then P/E is not very meaningful.
So, arithetically, negative earnings means a negative P/E, but when you're analyzing a stock, negative earnings means that you need to look at factors other than just P/E to figure out if it's a good investment.
Hope this helps. You may also find my free email newsletter helpful. You can see the latest issue and enter your subscription at www.mmzero-llc.com/fp/email.
Art Young
Mile Marker Zero, LLC
younga@mmzero-llc.com
www.mmzero-llc.com/fp
