Why Sector PER used to calculate the market price

BullionStock · 1 Why Sector PER used to calculate the market price Sat Feb 05, 2011 9:29 pm

BullionStock

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I have reviewed most of technical calculation of share valuations and noted that everybody use sector PER to get the market price .

We calculate EPS with specific share . but why we use Sector PER finally to calculate the price .

Some sectors , only very few companies maintain low PER values. But when it comes to calculations we use higher sector PER .

Is this fair enough such calculation & how do you justify the accuracy of this kind of valuation?

KDS

KDS

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sector wise PER is a average which guides us and tells us whether the company share price is lower or higher than what it should be. this is just a parameter to analyse the stock and its not the only parameter.

seyon

seyon

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Hi BullionStock

For Stock picking PER is an ideal tool to start After identifying companies which trade at low multiples and comparing with its sectors those shares may present an optimal investment opportunity. Now you would take the example CINV is trading in PE multiples of 7 times while GREG in the same sector trading at 75 times ( since the reason may be GREG is Speculative) . That is reason sector PE reflects 29 times as an average. Therefore If u value the share with sector PE it wont reflect the fair value...then you have to discount it to reflect the fair value.... CINV and GUAR are lowest PER in the sectors... therefore still there is chance the price to go up.....

You would compare the SECTOR PER and Market PER if ur selected companies are lowest PE multiples there is high chance the price to move up. provided that the companies should have growth and potential in the industry... since we should see the future growth rather than the past records...

Happy Trading

BullionStock

BullionStock

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Thanks Seyon,

Where can I find the sector PER details ?

CINV is trading at 137
GUAR is trading at 260
GREG is trading at 87

Appreciate how you identify them with PE multiples 7 & 75 respectively ?

BullionStock · 5 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 1:09 pm

BullionStock

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Seyon,

I just saw your post in CINV thread , Understand that CINV EPS is 22 after split..

Ok , yes 137/22= 7

So if the sector PER is around 28 or 29 , you discount the calculated value of 22X28=616

137/= is far below this value so we decide CINV is undervalue .

Correct me if my calculations are wrong.

Again pls let me know where I can find sector PER details .
Is it in cse.lk ?

Slstock · 6 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 2:59 pm

Slstock

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BullionStock wrote:Seyon,

I just saw your post in CINV thread , Understand that CINV EPS is 22 after split..

Ok , yes 137/22= 7

So if the sector PER is around 28 or 29 , you discount the calculated value of 22X28=616

137/= is far below this value so we decide CINV is undervalue .

Correct me if my calculations are wrong.

Again pls let me know where I can find sector PER details .
Is it in cse.lk ?

BullionStock :
Current Share Price/ EPS Annulized = Current PE.

Yes, CINV is undervalued and a good share for medium term. But you need to know that Investment Share Holding Companies does not always trade with high PEs. RHL and COCO, CABO ( though they are primarily Land and Propery they are mostly Investment) etc trade at a lower PE in the current market though heavily undervalued.

You can get Current Sector PE by
1) goto Csel.lk
2) goto "Equity Market" at the top
3) goto Sector Wise Market summary.

Hoep this helps

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Why Sector PER used to calculate the market price

1 Why Sector PER used to calculate the market price Sat Feb 05, 2011 9:29 pm

BullionStock

2 Re: Why Sector PER used to calculate the market price Sat Feb 05, 2011 11:26 pm

KDS

3 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 11:09 am

seyon

4 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 12:39 pm

BullionStock

5 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 1:09 pm

BullionStock

6 Re: Why Sector PER used to calculate the market price Sun Feb 06, 2011 2:59 pm

Slstock

7 Re: Why Sector PER used to calculate the market price

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