How do you calculate P/E?

[Rectalfier]

Is it the market cap divided by quarterly earnings? If so AMD is very low right now.

 

[HD2GO]

No no no P/E is Price/Earning. i.e. Stock (or Asset) Price divided by Earning/share. Normally earning/share is computed on an annual basis.

 

[rhinox99]

For some strange reason this post reminds me of that Charles Schwab football commercial

 

[Cknyc]

this is very OT.

But i guess since you mentioned amd its ok.

 

[MaxFPS]

So are other tech stocks, which can be attributed to the Fed not cutting interest rates today. Instead they will possibly be lowered early next year. NASDAQ hasn't closed this low (2511.71 current) since August '99. There's also been talk that our economy is slowly headed towards a recession.

 

[glenn1]

pretty simple actually.... divide the current share price by the earnings per share for the period you wish to examine.

Let's make up some numbers to show you. Say AMD shares closed today at $15. Last fiscal year, AMD's earnings were $1.50 per share. Divide 15 by 1.50, and you arive at 10. That figure of 10 would be the PE ratio for AMD. The time period being examined is important too... you can look at a company's trailing PE ratio, which uses the last FULL year's earnings (this is the one generally given and talked about), a company's Forward PE ratio, which uses estimates for the coming year, or Current PE ratio, which takes the earnings year-to-date, and an estimate for the remainder of the year.

 

[peemo]

AMD does look cheap right now with a P/E of about 6

Wright's on AMD

Intel by comparison has a P/E around 22

Wright's on Intel

So why would a relatively efficient market pay such a premium for Intel? Present value of future growth opportunities. It's not always good to have a low P/E. As glenn1 correctly notes, it's worth a look at prospective P/E based on analyst earnings forecasts as these are essentially what is impounded in current stock price.

Personally, I think AMD is cheap now. In 1999 they spent 22% of sales on R&D compared to Intel's 10%. AMD's sales for the first 3 quarters of 2000 were up 84% over the first 3 quarters of 1999.

Just don't shop by P/E alone.

 

[Rectalfier]

Thanks for all the input!

 

[randypj]

I think NOK, TXN, and HD are cheap now. ~13:10EST, 12/20/00.
It's called a buying opportunity.
--Randy