It is generally accepted that a P/E ratio of 20-30 is normal, and outside this range it is either undervalued or overvalued. However, the P/E ratio is not suitable for all types of stocks. The P/E ratio is mainly applicable to less cyclical companies, such as general manufacturing and service industries, but not to loss-making companies or cyclical companies. In addition, the level of P/E ratio is different in different markets, for example, the level of P/E ratio of A-share is higher than that of Hong Kong and US stocks, which mainly depends on the economic environment of different markets.
Difference:
1, the algorithm is different, static P/E = share price / current earnings per share, dynamic P/E = static P/E / (1 + compound annual growth rate) N times.
2, the denominator of the compound annual growth rate of time is different, in which the compound annual growth rate on behalf of the listed company's comprehensive level of growth, the need to use a mixture of indicators to assess; N is the assessment of the listed company can maintain this average compound growth rate of the number of years, the general agency forecasts are calculated in 3 years.
3, the dynamic price-earnings ratio is much smaller than the static price-earnings ratio, representing a dynamic change in performance growth or development.