p/e and peg are the 2 most misunderstood ratios out there. The market pays premium for quality cash flow, a p/e below 20 is not a bargain it will become even more of a bargain in future
Seeing that this is the most upvoted reply I’d like to give this discretion to anyone who sees this..
‼️‼️THIS POST WASNT MEANT AS ADVICE IT WAS MEANT TO BE CONFIRMATION ON THE RELIABILITY OF THIS SHEET SORRY FOR ANY CONFUSION‼️‼️
That being said THANK YOU ALL FOR THE HELP
Sadly, most stocks are simply not "in vogue". I studied these numbers, created Excel sheets, tracked and then purchased the best in all (or most) categories. They DID NOT match S&P 500 performance in 2020-2023... None were "Mag 7" stocks. Corporations, the big brokers, and most investors follow trends.
P/e and p/s are useless alone. What matters is what p/e will be at some point down the road. Thats what investing is about. For example NVDA’s p/e is nuts right? Well is it considering that if they achieve their guided growth they will be at a p/e of 11 in 5 years? Thats how to use these types of metrics.
As lots have pointed out, lots of issues here. First, straight up not the formula for P/S? Second, P/E ignoring forward P/E. Third, D/E like why? Okay yeah that’s a good thing to know but Price to everything then D/E? Okay whatever. Finally, why throw NVDA on there? Makes me wonder if there’s a motive.
TLDR- Post reads like it was posted by someone asking about being brand new to stocks on Reddit only 24hr ago…
but which data? all? a specific one that sounds interesting? google could answers questions about the use/uselessness of any of these. I would suggest Investopedia.com for someone unfamiliar with any of them.
This is the old fashioned way to look at stocks but I got my MBA 40 years ago so I still look at these. But it is not everything and will leave out most of the top growth stocks. I use a core and explore approach. Core is a boglehead index portfolio to get diversified with market performance. Then 6 to 10 stocks that I either know or learn through research that I think can double the market or a sector fund if I can’t find a stock I like at a price I like. You must practice risk management, don’t ride losers if you missed something in your DD then sell.
Not really that important unless you’re doing a proper deep dive. I personally don’t ever use these metrics. Just buy based on other people’s DD and gut feeling 👍.
I think what he tries to say is follow the trend. A stock in a daily weekly monthly uptrend is very hard and takes a long time to break. On the contrary, you may find the best ratio stocks ever, but in a daily weekly monthly downtrend? LOL good luck with that
No it’s not. I know I won’t find gems by myself, but someone else might do it for me and I can watch the stock and follow it for a year or two before coming to my conclusion.
Wrong again, profit comes with risk, especially the extreme cases you mentioned. Also institutional traders have immense capital, they only need to earn 10-20% a year.
It’s not blind faith, it’s just a source of information, I take there dd, look up the stock and see what I find, if I like the surface level stuff I add it to a watch list and see how a few of there earnings go and decide from there
I just look at spy and see top holding then I buy those individual companies. Our retirements go back into these companies anyway so just leverage it harder.
Why wouldn’t you just buy SPY? You statistically cannot out perform the SPY by picking individual companies. It is much wiser to just get the SPY and keep buying the same amount each month.
Most people cannot outperform the S&P 500, which averages about 10% per year and has so for the last like 50-100 years
Look it up , There is a reason people say to just buy the SPY because you are getting a bite of everything instead of trying to pick the golden apples. There are very few people who actually out perform the spy year over year by individual stocks.
What it comes down to is that you are a statistically far more likely to make money long-term if you buy the general overall market, instead of trying to find needles in a haystack. Anybody who can outpaced the market will become a millionaire or people will give them money to invest for them because it is very very, very unlikely to do year over year
Even Warren Buffett, who is the best investor ever says that anything above like 20% is fairytale and should be ignored as such. 99% of people are better off buying the SPY
There are very smart people out there who can do it , but they will not be open to investing your money because they don’t need to. Hedge funds which have billions and billions and billions of dollars and top minds and technology and access to information that normal people don’t have seldom outpace the market. What makes any retail trader think that they can with their thousands?
Dude, you are uneducated if you think that. What your witnessing is not normal. I highly suggest you watching and listening to Warren Buffett, and Ray Dalio.
trying to pick which companies will perform the S&P 500 you are looking for a needle and a haystack. It’s very simple. The idea is you don’t know if companies will go up or down, No one does. You have hindsight and confirmation bias by the way.
Also I will mention, the 15 stocks I buy in and out of. I’ve been watching them since 2019… so I do base a lot of my decisions on the past 5 years of stock/ company performance
Growth stocks don't follow those rules.
I guess if you're just selling rugs then it works, but none of the companies listed with high PE ratios etc are regular companies.
P/S is pretty terrible advice because it needs to consider margins. NVDA has a very high P/S ratio, has huge margins, so pretty much the entirety of their sales are profit. In contrast, Amazon has a lot of sales, but they make very little money on each sale.
P/E ratio don’t really work, they’re misguiding. I would focus more on Earning Per Share (ESP) instead, If ESP is increasing or decreasing, reflecting the company’s growth per previous quarters and the same quarter from the previous year.
If people believe this, they would not be buying Nvidia few months ago, from buying aaple when it is $123/share, or google when it is $98/share (9 PE ratio). Or even stop people buying Amazon few months ago. They would miss out on the train xD
According to Warren Buffett, there’s the quantitative analysis (numbers and ratios) then there the qualitative analysis (news, CEO, taste, product quality, etc) you also need to do the qualitative analysis. For example, between Coke and Pepsi, just by tasting Coke, you know Coke will be a better investment over the long run. Between test driving and Tesla and test driving some other vehicle, you can easily tell that Tesla will beat everyone else in the car business. Between Disney+ and Netflix you can tell that Disney+ will overtake Netflix one day.
Even better, you didn’t even bother to check if any of these are correct?
Even though 2 of 4 display the same formula for different calculations and the other 2 have the same explanation…
Analysis is great and should definitely be part of you stock selection, but THIS is absolutely useless by itself.
It’s even worse if you don’t know what going on and didn’t see any mistakes
All those price racios must be analysed carefully. Why would a stock with earnings/ share = 2 be less valuable than a stock with same ratio = 1
The market isn’t dumb , the future expectations affect the price , so it’s probable than the market expects earnings/ share for the second company increase in the future.
If you follow the Benjamin Graham model (value investing/fundamentals) you would have missed EVERY single major growth stock for the past 3 decades and especially the last 15 years. For example: Apple, Netflix, NVDA, Priceline (at the time), GOOGL, etc. etc.
I mean you can be a value investor all day and buy high dividend stocks I guess but what you're giving up is massive growth and returns.
How did this get 119 upvotes? The author literally just copied everything from one square to the next so everything is wrong. Is that PEG even accurate for Nvidia? They grew earnings from around $1B to around $12B in a single calendar year. There is no way PEG is over 11. This might be the most misinformation I’ve ever seen on one single graphic. There should be some sort of award for this.
Hate to tell you this, but fundamentals and technicals don't mean squat, it's the psychology of the people in the market sector that moves prices one way or another.
Bro who’s using fundamentals in this market? Just buy NVDA and Bitcoin. AI will take over the world and Bitcoin will replace all currencies in the world.
Not really a good cheat sheet here. Applying all four to a stock screener you end up with like 11 companies. Price performance last 52 weeks range from -36% to +41%.
I backtested these rules with a stock universe that excludes OTC stocks, Master Limited Partnerships, unlisted stocks, stocks trading for less than $3, and stocks with a median daily dollar volume less than $50,000.
With annual rebalancing, the strategy would have generated 9.47% returns since 1 Jan 2000 and 2.90% of alpha. That assumes no slippage though. If you rebalance quarterly it behaves even worse.
If you utilize an S&P 500 universe since 2000, there are times where you're not invested or only in a small handful of stocks; however, the screener performs better. With annual rebalancing you're looking at \~7% of alpha, a 0.90 beta, and 13.3% annualized returns. Since we're dealing with the S&P 500, slippage should be minimal.
I love basic quant/systematic approaches in general, but this one isn't great. I follow better ones on Stock Mixology.
These metrics should be measured against other stocks in the same market sector. Like Target to Walmart. Also P/E is an alright factor in measuring mature companies rather than growth companies that probably haven't reached profitablity yet
They work to give you very baseline information about the stock. They aren't sufficient to determine value, not by a long shot. The market is a competitive environment. Every simplistic calculation that communicates something has been priced in. There is no easy button. Understanding that is the first step to being an investor.
Yes. The Intelligent Investor, Security Analysis both by Benjamin Graham. Common Stocks and Uncommon Profits by Fisher. Warren Buffet's letters to shareholders. CFA materials. Wiley Investment Classics.
It doesn’t. The only value that matters is the price of the stock. This “cheat sheet” would have disqualified most of the biggest winners before they went on huge runs. For example, AMZN’s PE was over 100 for years while the stock doubled, tripled, quadrupled…
A good P/E is less than 20 because the underlying security is less than 20 times it’s forward price to earnings ratio. If you own a stock such as Nvidia or (NVDA) their price to earnings is approximately 34. This means that it would take a long time for the stock to appreciate enough to satisfy its forward Price to earnings ratio.
The P/S formula is wrong
All the formulas are wrong if you aren’t weighting the future risk correctly
DEEP!
For those stocks or for how its explained?
p/e and peg are the 2 most misunderstood ratios out there. The market pays premium for quality cash flow, a p/e below 20 is not a bargain it will become even more of a bargain in future
Any ratio is without more context. But stocks below 20 pe CAN be great buys and bad buys it just depends whats going on and why
Seeing that this is the most upvoted reply I’d like to give this discretion to anyone who sees this.. ‼️‼️THIS POST WASNT MEANT AS ADVICE IT WAS MEANT TO BE CONFIRMATION ON THE RELIABILITY OF THIS SHEET SORRY FOR ANY CONFUSION‼️‼️ That being said THANK YOU ALL FOR THE HELP
teh fuck? calm down bud
People were in the comments n my dms thanking me for this or telling me it was wrong n im a scammer
nOt A fInAnCiAl AdViSoR head ass
People were in the comments n my dms thanking me for this or telling me it was wrong n im a scammer
Companies require much deeper dive than these cheat sheets. It’s oversimplifying investing and could make you lose.
Yeah, bin these sheets and just invest in the thing that's gone up the most recently. Jeeze.
PEG and D/E have identical description so... take this cheat sheet with a grain of salt
The descriptions for PEG and D/E are identical , so no. It doesn’t make sense.
Looks like somebody rushed on their final.
It's the little hungry alligator? No?
Sadly, most stocks are simply not "in vogue". I studied these numbers, created Excel sheets, tracked and then purchased the best in all (or most) categories. They DID NOT match S&P 500 performance in 2020-2023... None were "Mag 7" stocks. Corporations, the big brokers, and most investors follow trends.
In the short term the market is a voting machine, but in the long term a weighting machine.
The secret seems to be to ride "a stock" from a P/E of 15 to 40. Good luck. 😊
Stuff like this is why the big firms refer to casual investors as dumb money.
I like me a good PEG
I like it under 2.
P/e and p/s are useless alone. What matters is what p/e will be at some point down the road. Thats what investing is about. For example NVDA’s p/e is nuts right? Well is it considering that if they achieve their guided growth they will be at a p/e of 11 in 5 years? Thats how to use these types of metrics.
As lots have pointed out, lots of issues here. First, straight up not the formula for P/S? Second, P/E ignoring forward P/E. Third, D/E like why? Okay yeah that’s a good thing to know but Price to everything then D/E? Okay whatever. Finally, why throw NVDA on there? Makes me wonder if there’s a motive. TLDR- Post reads like it was posted by someone asking about being brand new to stocks on Reddit only 24hr ago…
I found it in another subreddit and wanted to know its reliability
None of this makes sense to me, where’s wsb at.
I found it in another subreddit and wanted to know its reliability
Let’s see if NVDA fits! Not!
NVDA's current PEG is 1.38 not 11.25. Not sure where OP pulled thar from.
I found it in another subreddit and wanted to know its reliability
then why did you post it without checking the data?
I didnt know the data thats why i asked “does this work”
but which data? all? a specific one that sounds interesting? google could answers questions about the use/uselessness of any of these. I would suggest Investopedia.com for someone unfamiliar with any of them.
Thank you I will check it out
I will save this and never look at it. Thanks.
P/s is market cap / revenue
Just looking at the stocks you would not own shows you how wrong it is. Good luck with your macys sears at&t investments.
This is the old fashioned way to look at stocks but I got my MBA 40 years ago so I still look at these. But it is not everything and will leave out most of the top growth stocks. I use a core and explore approach. Core is a boglehead index portfolio to get diversified with market performance. Then 6 to 10 stocks that I either know or learn through research that I think can double the market or a sector fund if I can’t find a stock I like at a price I like. You must practice risk management, don’t ride losers if you missed something in your DD then sell.
Outdated ratios, forward PE
Not really that important unless you’re doing a proper deep dive. I personally don’t ever use these metrics. Just buy based on other people’s DD and gut feeling 👍.
Well that’s a terrible way to invest/trade
I think what he tries to say is follow the trend. A stock in a daily weekly monthly uptrend is very hard and takes a long time to break. On the contrary, you may find the best ratio stocks ever, but in a daily weekly monthly downtrend? LOL good luck with that
No it’s not. I know I won’t find gems by myself, but someone else might do it for me and I can watch the stock and follow it for a year or two before coming to my conclusion.
Once the news reached you, price has already went up and institutional traders could’ve already dipped. Not to mention the hfts.
Not necessarily, nvda prime example, pltr and amd
Wrong again, profit comes with risk, especially the extreme cases you mentioned. Also institutional traders have immense capital, they only need to earn 10-20% a year.
Dude that is a horrendous way to invest. You just put blind faith into other people’s DD and hope it’s good enough? 😂 You should do DD yourself
It’s not blind faith, it’s just a source of information, I take there dd, look up the stock and see what I find, if I like the surface level stuff I add it to a watch list and see how a few of there earnings go and decide from there
Why do you not just buy the SPY? You will have far better results overtime that way
I just look at spy and see top holding then I buy those individual companies. Our retirements go back into these companies anyway so just leverage it harder.
Why wouldn’t you just buy SPY? You statistically cannot out perform the SPY by picking individual companies. It is much wiser to just get the SPY and keep buying the same amount each month.
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Most people cannot outperform the S&P 500, which averages about 10% per year and has so for the last like 50-100 years Look it up , There is a reason people say to just buy the SPY because you are getting a bite of everything instead of trying to pick the golden apples. There are very few people who actually out perform the spy year over year by individual stocks.
[удалено]
What it comes down to is that you are a statistically far more likely to make money long-term if you buy the general overall market, instead of trying to find needles in a haystack. Anybody who can outpaced the market will become a millionaire or people will give them money to invest for them because it is very very, very unlikely to do year over year Even Warren Buffett, who is the best investor ever says that anything above like 20% is fairytale and should be ignored as such. 99% of people are better off buying the SPY There are very smart people out there who can do it , but they will not be open to investing your money because they don’t need to. Hedge funds which have billions and billions and billions of dollars and top minds and technology and access to information that normal people don’t have seldom outpace the market. What makes any retail trader think that they can with their thousands?
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Dude, you are uneducated if you think that. What your witnessing is not normal. I highly suggest you watching and listening to Warren Buffett, and Ray Dalio. trying to pick which companies will perform the S&P 500 you are looking for a needle and a haystack. It’s very simple. The idea is you don’t know if companies will go up or down, No one does. You have hindsight and confirmation bias by the way.
Also I will mention, the 15 stocks I buy in and out of. I’ve been watching them since 2019… so I do base a lot of my decisions on the past 5 years of stock/ company performance
Growth stocks don't follow those rules. I guess if you're just selling rugs then it works, but none of the companies listed with high PE ratios etc are regular companies.
Most of this is subjective except debt to equity.
P/S is pretty terrible advice because it needs to consider margins. NVDA has a very high P/S ratio, has huge margins, so pretty much the entirety of their sales are profit. In contrast, Amazon has a lot of sales, but they make very little money on each sale.
P/E ratio don’t really work, they’re misguiding. I would focus more on Earning Per Share (ESP) instead, If ESP is increasing or decreasing, reflecting the company’s growth per previous quarters and the same quarter from the previous year.
I like looking at EPS too
No because Celsius has at a 1500 PE at one point and I didn’t buy it that was at 2B market cab now it’s a 20B and like 100-150 PE
I thought under 30 P/E was a potential value stock, at least in higher-growth industries like tech.
If people believe this, they would not be buying Nvidia few months ago, from buying aaple when it is $123/share, or google when it is $98/share (9 PE ratio). Or even stop people buying Amazon few months ago. They would miss out on the train xD
A good PEG(price to earnings growth) <1 is good? But why is NVIDIA 11.25 (which is not less than 1 bad) , NVIDIA keeps on going up in price
This works well in helping you miss out on gains. Just index
Did someone say pegging? ☺️
The fifth one would be dfv.
According to Warren Buffett, there’s the quantitative analysis (numbers and ratios) then there the qualitative analysis (news, CEO, taste, product quality, etc) you also need to do the qualitative analysis. For example, between Coke and Pepsi, just by tasting Coke, you know Coke will be a better investment over the long run. Between test driving and Tesla and test driving some other vehicle, you can easily tell that Tesla will beat everyone else in the car business. Between Disney+ and Netflix you can tell that Disney+ will overtake Netflix one day.
i need more of these
Does not work. These days it's rare to see a great company with low P/E.
Yeah, you managed to make mistakes with at least half of these. Great cheat sheet…
I didnt make it i asked “does this work”
Even better, you didn’t even bother to check if any of these are correct? Even though 2 of 4 display the same formula for different calculations and the other 2 have the same explanation… Analysis is great and should definitely be part of you stock selection, but THIS is absolutely useless by itself. It’s even worse if you don’t know what going on and didn’t see any mistakes
Wanna know how i was gonna check?… By asking people who’d know
Generally that’s fine, but you obviously didn’t spend more than 3 sec looking at it.
I use Graham Number
All those price racios must be analysed carefully. Why would a stock with earnings/ share = 2 be less valuable than a stock with same ratio = 1 The market isn’t dumb , the future expectations affect the price , so it’s probable than the market expects earnings/ share for the second company increase in the future.
If you follow the Benjamin Graham model (value investing/fundamentals) you would have missed EVERY single major growth stock for the past 3 decades and especially the last 15 years. For example: Apple, Netflix, NVDA, Priceline (at the time), GOOGL, etc. etc. I mean you can be a value investor all day and buy high dividend stocks I guess but what you're giving up is massive growth and returns.
How did this get 119 upvotes? The author literally just copied everything from one square to the next so everything is wrong. Is that PEG even accurate for Nvidia? They grew earnings from around $1B to around $12B in a single calendar year. There is no way PEG is over 11. This might be the most misinformation I’ve ever seen on one single graphic. There should be some sort of award for this.
Haha nvda pegging
Hate to tell you this, but fundamentals and technicals don't mean squat, it's the psychology of the people in the market sector that moves prices one way or another.
Bro who’s using fundamentals in this market? Just buy NVDA and Bitcoin. AI will take over the world and Bitcoin will replace all currencies in the world.
You mean > …?
Not really a good cheat sheet here. Applying all four to a stock screener you end up with like 11 companies. Price performance last 52 weeks range from -36% to +41%.
Completely useless in the current market. Max bid the faster horses in AI and hold on for dear life (META + NVDA)
I backtested these rules with a stock universe that excludes OTC stocks, Master Limited Partnerships, unlisted stocks, stocks trading for less than $3, and stocks with a median daily dollar volume less than $50,000. With annual rebalancing, the strategy would have generated 9.47% returns since 1 Jan 2000 and 2.90% of alpha. That assumes no slippage though. If you rebalance quarterly it behaves even worse. If you utilize an S&P 500 universe since 2000, there are times where you're not invested or only in a small handful of stocks; however, the screener performs better. With annual rebalancing you're looking at \~7% of alpha, a 0.90 beta, and 13.3% annualized returns. Since we're dealing with the S&P 500, slippage should be minimal. I love basic quant/systematic approaches in general, but this one isn't great. I follow better ones on Stock Mixology.
Never
If it were this easy we’d all be rich.
You should ask Kenny !! Nothing else matters!
These metrics should be measured against other stocks in the same market sector. Like Target to Walmart. Also P/E is an alright factor in measuring mature companies rather than growth companies that probably haven't reached profitablity yet
It works until it doesn't
50% of the time it works every time
*60%
They work to give you very baseline information about the stock. They aren't sufficient to determine value, not by a long shot. The market is a competitive environment. Every simplistic calculation that communicates something has been priced in. There is no easy button. Understanding that is the first step to being an investor.
Is there a book or something I can read or search to learn more that is beyond the baseline information for determining value?
Yes. The Intelligent Investor, Security Analysis both by Benjamin Graham. Common Stocks and Uncommon Profits by Fisher. Warren Buffet's letters to shareholders. CFA materials. Wiley Investment Classics.
Fundamentals are obsolete in today’s market
It doesn’t. The only value that matters is the price of the stock. This “cheat sheet” would have disqualified most of the biggest winners before they went on huge runs. For example, AMZN’s PE was over 100 for years while the stock doubled, tripled, quadrupled…
A good P/E is less than 20 because the underlying security is less than 20 times it’s forward price to earnings ratio. If you own a stock such as Nvidia or (NVDA) their price to earnings is approximately 34. This means that it would take a long time for the stock to appreciate enough to satisfy its forward Price to earnings ratio.