reinforce concept: If a company has lower P/E than its peers/industry, then this company is undervalued. If a company has observed P/E lower than its own intrinsic P/E, then this company is undervalued. Just make myself more clear!
You are getting a company’s $1 earnings at a relatively lower price.
“If a company has lower P/E than its peers/industry, then this company is undervalued.” I dont think the statement is correct. Along with comparing P/E with its peers, we need to see why its P/E is lower. We need to check its fundamentals like ROE and g. If there is no problem with the fundamentals and are comparable to peers, then we can say the company is undervalued. “If a company has observed P/E lower than its own intrinsic P/E, then this company is undervalued.” I can agree with this one. Because Intrinsic P/E takes into account the Franchise Factor which includes affect of ROE and its growth g. Do you agree?
Makes sense rusibus, even if a company has a lower P/E than peers,it could still be over valued on it’s own merits.
If a company has lower P/E than its peers/industry, then this company is RELATIVELY undervalued. (compared to the group)
Yeah. Relatively!