The P/E ratio - A key figure and nothing more.

"The share has a P/E ratio of 10, it is really cheap".

Let's be honest, how often have we heard or read this sentence.

Here is a small calculation examplewhy the P/E ratio is not necessarily the best indicator.

Initial situation:

• Share price old: 100€
• Profit old: 10€
• P/E ratio old: 10

Now the company presents new figures and the share falls by 20%, as the profit has plummeted by 50%.

New situation:

• Share price new: 80€
• Profit new: 5€
• P/E RATIO: 16

Result:

Although the share price has fallen by 20%, the share
even more expensive on a P/E basis than than before.

Learning:

Never buy a stock based on a single key figure!

#kgv
#kennzahlen
#finanzenfüranfänger

PS: Got it from the Instagramstory of investing.lifetime!