A Look at Comparative Evaluations of Industry Groups
August 29th, 2007
A Look at Comparative Evaluations of Industry Groups
How can we, as small investors, figure out the proper price-earnings ratios for stocks in which we are interested? To begin with, we should know something about the comparative status of various stock groups or industry classifications. If, for instance, you know that chemical stocks are generally given multipliers of 20 to 30, then the first step is to determine the status of the company in question as a basis for allotting it a place between the lower limit of 20 and the upper limit of 30. Or, for another in-stance, if aircraft stocks are generally accorded 10 to 17 times earnings, then securities of this classification should be evaluated accordingly, unless some exceptionally well-situated issues should deserve higher multipliers due, say, to their heavy engagement in electronics or outer-space exploration.