Price to Earnings ratio (PER) is arguably one of the most basic metric of valuation for a fundamental analyst. It is simply a ratio of a company’s current share price compared to its per-share earnings. While this is simple to understand, it can be over simplistic at times. There are many different ways of interpretation and variations which we can apply to this ubiquitous metric.
Price to Recurring Earnings
The net profit of companies may contain one-off charges which may distort the true representation of the business. One-off charges can be in the form of profit or losses and a value investor typically would not pay for such arbitrary items. By stripping out such charges, investors will get a better picture of a company’s true core earnings which pertains to the business that he is actually interested in purchasing. Fair value gains booked by companies are a common item that ......