Homework Help: Economics

Posted by Em on Saturday, May 28, 2011 at 3:24pm.

Hi
My three criterion are now, if the share is blue-chip or not, the companies PE and its comparison to the S&P/ASX200.

Regarding the companies I have compared it to a rival companies PE, I said that it is good that its PE is higher than the other company but it is still a bad reflection on the company as the PE is only 0.09. (Would that be 9cents?)

Is that correct?

Economics - Ms. Sue, Saturday, May 28, 2011 at 3:27pm
Where did you find a PE of 0.09? Which company? I've never seen such a low PE.
Economics - Em, Saturday, May 28, 2011 at 3:32pm
Qantas Airways on the ASX

My working out is below:
Qantas Price Earnings Ratio =
(Market Value per share)/(Earnings per share (EPS))
2.08/(Earnings per share (EPS))
Qantas EPS =
(Company net income-dividends)/(Number of shares available)
(417,000,000-0)/19,000,000
$21.94
Qantas Price Earnings Ratio =
2.08/21.94
$0.09
Economics - Em, Saturday, May 28, 2011 at 3:34pm
That came out badly

Retype

PE = Market value per share/EPS
EPS = net income-dividends/no of shares available
EPS = 417000000-0/19000000
EPS = 21.94
PE = 2.08/21.94
PE = 0.09
Economics - Ms. Sue, Saturday, May 28, 2011 at 3:51pm
I don't know what you did, but the P/E ratio is about 16 for Qantas. (That's within the range of most stocks.)

Most financial sites show P/E.
Price: 2.08
EPS: 0.13

2.08/0.13 = 16

http://finance.yahoo.com/q;_ylt=AuuHd2GrepknzNvwLtScYYTxVax_;_ylu=X3oDMTFiMDA2NWVkBHBvcwMxMgRzZWMDeWZpU3ltYm9sTG9va3VwUmVzdWx0cwRzbGsDcWFuYXg-?s=QAN.AX
Economics - Ms. Sue, Saturday, May 28, 2011 at 3:53pm
High P/E's (30 +) usually means that the price of the stock is pretty high. Investors believe that the stock's price will go a lot higher.

Some industries (utilities) tend to have P/E's under 10, but it's unusual for other companies to have such low PEs.
Economics - Em, Saturday, May 28, 2011 at 3:55pm
Thank-you for all your help so far.

How did you find the EPS? I think I messed up there..
Economics - Em, Saturday, May 28, 2011 at 3:56pm
Oh, I see, you got it off the website. I'm just wondering how I got the EPS so wrong.
Economics - Ms. Sue, Saturday, May 28, 2011 at 4:02pm
I got it from the website, but I also divided the latest price by the year's earnings per share. That information is also on the website.

You're welcome.
Economics - Em, Saturday, May 28, 2011 at 4:08pm
Thank-you for all your help XD
Economics - Ms. Sue, Saturday, May 28, 2011 at 4:19pm
You're very welcome.

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