How to get P/E from constant growth DDM? Blanking on this one for some reason and don’t have the book I need. Thx.
(1-b)/(r-g) ?
…and multiply by 1+g for trailing PE
P = D0 * (1+G) / (R-G) P = E0 (1-RR) * (1+G) / (R-G) P / E0 = (1-RR) * (1+G) / (R-G) Where RR = retention ratio This is trailing P/E, you can get leading P/E by simply starting with P= D1 / R-G and ending up with P / E1 = (1-RR) / (R-G)
P/E = dividend payout / r-g = 1-retention rate/r-g = 1-b/r-g
Knew it was something easy. Thanks a bunch!
The only formula I memorize is the Gordon growth model and then any of the other Price multiples can be derived from that.