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How do you compare price ratios across time?

While comparing price ratios, the likes of P/E, P/B, P/S, etc, across time, do you calculate

 1) keeping P constant, say today’s price and compare across difference earnings or 

2) ratios as on that time? 

Thanks.

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people keep price from before with earning from before. or book value from before. you do this so you see valuation at a point in time.

no one does it where you keep price constant, cuz if you keep price constant. earning will typically be lower in the past, so it’ll look like it has a high pe/pb and it has gotten cheaper. which isnt necessarily the case!

I love my cheese. I got to have my cheddar.

Yea you definitely don’t keep any of those factors constant. If you want to compare ratios from now to say 20 years ago then I would just look at industry averages across time and adjust for inflation. You’ll see valuations have been relatively higher and some would argue it’s because the markets are more efficient, so higher valuations are justified. How much higher? That’s the million dollar question.

I’d second this, you compare the earnings/sales/etc to the price at the time. No one uses just one current price.

With most I’m guessing today you’ll find them quite high.

Usually a good sign for future returns (snark, snark wink)

lol. valuations are mean reverting. the best argument i’ve seen why they have been relatively high, is mostly due to low rates.

I love my cheese. I got to have my cheddar.