Today, I will kick off Capital Orbit’s “Investing Made Easy” video tutorial series. I have created a video tutorial for you that explains how to find the historical price to earnings ratios for any stock. Historical price to earnings ratios (P/E) are useful because we can compare the present P/E against past long-term data. For example, a stock might have run up in terms of valuation recently (different from an increase in price) and it might not be wise to invest at higher valuations if the fundamentals have not improved correspondingly. You can make this decision if you are aware of historical price to earnings ratios. With historical numbers you can also find a long-term average P/E for a stock.
How to calculate historical price to earnings ratio video tutorial- Investing Made Easy series
I have analyzed historical price to earnings ratios for Mahindra & Mahindra Ltd. I have explained how to do it step-by-step. After seeing this video, you will be able to do this for a stock on your own. If you have any questions feel free to use the comments section below.
- Why should you look at historical price to earnings ratios?
- How can you find historical stock prices for free from publicly available data?
- How can you make a decision on whether to use consolidated or standalone earning per share (EPS) figures?
- How can you calculate the historical price to earnings ratios at the end of a past year?
- How can you calculate average price to earnings (P/E) for your chosen period (e.g. 10 years)?
- How can you find trailing twelve months (TTM) P/E for a stock?
- What are the checks you should think of when doing these calculations?
Video tutorial description
Less than 18 minutes. You might want to view this video in full screen or at higher resolution (by clicking the gear icon in the bar at bottom of youtube window) if some details are not visible properly. Else if you still have problems you can use the link to view it on Youtube directly. Thanks.
Direct link to video tutorial on Youtube
I have calculated average price for one financial year by using daily stock close prices. This means that I will have 10 data points for 10 years. You can get even richer analysis by doing rolling 4 quarters. Effectively I can get 4 data points for each year. This is usually done by research analysts in broking houses. I agree it makes for a prettier picture, but practically, an average price for the year is good for your analysis. You have to make best use of your time!