New Explanation for PE and PB Ratios
So the morale of the Untold Story that I want to portray is that: 1) Please don't anyhow follow the trend, follow the people, follow the tips; 2) Do your own analysis and make your own decision. I believe if you constantly make your own decision, you will slowly find the right criteria and start making gains! To assist a newbie on making this decision, I suggest using these 2 ratios to see if the particular counter is TOO SIGNIFICANTLY OVERVALUED. 1) PE Ratio The first ratio is the regular Price to Earning Ratio. It is basically taking the Share Price divided by Net Profit per share (There maybe other calculations on the net, but I believe this is the most popular calculation of this financials) . To understand this ratio further, it is good to get a counter with a low PE Ratio. For this ratio, I interpret it as Price to Expectation Ratio . The higher the ratio, the higher the expectation of its up-coming earnings/net profit. Therefore, if the net profit fall...