Quote:
Originally Posted by Hylton
Not quite. What is the P/E multple? How many shares are floating?
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Currently, the P/E for GM should be N/A. Unless you wanted to show a negative number. Which wouldn't make sense as it would appear that GM would be paying you to own their stock. P/E is simply a calculation. And GM is still too "new" right now to have much meaning, and like Hylton says, are they counting the shares still in the closet as outstanding or not?
In contrast, Ford's p/e is roughly 10. (16.17/1.67) So as an investor, you're paying 10 bucks for every dollar of earnings over the next year. Is this too much? My own philosophy says if it's above 10, it's a bit high, but still might be ok. If it's above 20, I'm beginning to wonder.
Price per share/earnings per share is your P/E. The higher this number, the more hope investors have of the earnings increasing since their purchase of the stock. Or it's overbought. Where that line is would be anyone's guess.
This is the most popular metric for stocks, but it's only ONE facet of investing and doesn't tell the entire story of a stock. You need a lot more info to make a better choice.
And I seriously hope HeHasReturned was only kidding about the Chipotle example. If he's investing like that, there's no help for the markets...