Here’s what I do to measure whether this Singapore share is expensive or not. And whether this stock can go higher
“And that’s the problem, high P/E ratio fucks you upside down…”
When I buy stocks, I look at the transaction like how I approach buying a private business. I want to look at the prospects of the business and the people running the company.
More importantly, I want to look at the price I’m paying.
One simple measure of buying shares at the right price is the “price-to-earnings”, or P/E ratio.
Say a company trades at 30x P/E. This means that its shares are trading at 30 years’ worth of net earnings. If this company’s net earnings is $1 per share per year, you’re paying $30 to buy its earnings.
In other words, if you buy the entire business and if the business continues to earn as much money as it does today, it takes 30 years to get your money back.