Back
The Master Word of today Corporate Finance is the term "Value". On my own mind, the concept of value is the key stone of management. For sure, it would not be too difficult to find some weaknesses, including many weaknesses, but other concepts used for companies valuation are no so usefull as the concept of value.
The Price Earning Ratio for example was used for many years, but new economy made it obsolet. Dot Com companie's made it an unreliable indicator, given that their life cycle did'nt match with any model.
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95). EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
To be valuable, varaition should not be to .....
