| Earnings Per Share, And Price/Earnings Ratio Two | | | | from 10 to 15, with a few undervalued stocks |
| Tools For Determining Stock Viability | | | | hitting 7 to 8 years. One of the hallmarks of the |
| There is far more to owning a stock than its | | | | dot-com boom was the absurdly high price |
| share price, even if it's the share price that gets | | | | earnings ratios some shares of stock were selling |
| all the coverage in the financial press. A share | | | | at P/E ratios of 100 or more, during the '90s. |
| price only shows the price to buy the stock, or | | | | One thing to be aware of is that there are |
| how much you can theoretically sell it for, but it | | | | multiple ways of calculating earnings per share; |
| does little to convey how much value is retained | | | | they all boil down to set asides of funds that are |
| from holding the stock for the long term. | | | | paid out before earnings are divided up between |
| The key to determining long term value in a | | | | shares. If you have any questions about how |
| stock is it's price/earnings ratio. Price/earnings is, in | | | | earnings per share are calculated for a stock you |
| essence, the price of a share, divided by the | | | | hold, ask your broker for more information. |
| earnings per share. Earnings per share is calculated | | | | The key to earnings per share is that by holding a |
| by dividing the total profits (less operating | | | | share of a company, you are, in theory, holding a |
| expenses, and preferred stock dividends) by the | | | | piece of a corporation with a retained value, and |
| number of outstanding shares in circulation. | | | | you aren't speculating on the price going up |
| When looking at price/earnings ratio, a handy rule | | | | indefinitely. One method of maximizing a good PE |
| of thumb is to try to calculate how many years | | | | ratio stock with a stable price is to invest in a |
| of earnings would one share have to accumulate | | | | dividend purchasing plan in essence, you're telling |
| to match the price it was originally purchased at. | | | | the company to reinvest your dividends into new |
| In most companies, this results in a ratio ranging | | | | shares of the stock. |