Aurora Acquisition Corp (AURC)

[pugdog]

If you watch CNBC, Bloomberg, etc. – a lot of the talk is about the new “earnings statements” that have come out for a company (once every 3 months).

Let’s say a company has 5 million shares outstanding, and it comes out with earnings of 1 million dollars for a quarter. The p/e ratio (price over earnings) is:

5 million shares over 1 million earnings, this equals a p/e ratio of 5, this is good. I don’t know what the average p/e ratio of all stocks is, maybe around 16-17. Whatever the case, you want to look at p/e ratio of the companies you are looking at in relation to their respective industries. And remember, the lower the p/e, the better, in almost all cases.

So, your thinking a p/e SHOULD always equal 1? Well, investors are used to investing more than what the company is worth, this gets us into “bubbles”. Talk about “is there such thing as a bubble”, this comes from when can a p/e ratio become too high.