what is the difference between these two versions of the P/E ratio? Are they two sides of the same coin? div payout / (k-G) PPS/EPS
“Likewise, a specific stock may have a temporarily high price when, for whatever reason, there has been high demand for it.” can someone give me an example?
huh? div payout / (k-g) is Gordon Growth Model and is a theoretical price for a stock that pays out dividends. PPS/EPS could be forward looking (fwd EPS) or trailing P/E (past 12 month EPS). ------------------------------------------------ “Likewise, a specific stock may have a temporarily high price when, for whatever reason, there has been high demand for it.” can someone give me an example? sure, KO trades up to $55 b/c it’s disclosed Bill Gates increases his stake. Investors buy KO b/c they want to hold it.
how is the Gates example temporary? investors hold on to the stock because his buying the stock signals that the stock has minimal risk or whatever reason. it is a long term outlook…
Example: A stock is announced to be included in the S&P 500. All of the index funds out there will be forced to buy it.
bmwhype Wrote: ------------------------------------------------------- > how is the Gates example temporary? investors hold > on to the stock because his buying the stock > signals that the stock has minimal risk or > whatever reason. it is a long term outlook… but what if it’s short term. then its temporary. we could go back and forth.
“Likewise, a specific stock may have a temporarily high price when, for whatever reason, there has been high demand for it.” I recently read a study indicating that stocks will pop up in the short-term after they appear in Barron’s or on the front cover of the WSJ (assuming positive news). The increased visibility can lead to higher short-term demand. Otherwise, I agree with the Gates example above. For example, Buffett recently disclosed his stake in Burlington Northern and the entire sector rallied. There was no change in news besides the Buffett info. and rally was pronounced, so there was clearly some correlation. Same thing with MOT and Icahn and many other examples of uber investors. I think MOT is actually down from where he bought it (but I’m too lazy to look up the news item) which would underscore the short-term nature of the rally.
"huh? div payout / (k-g) is Gordon Growth Model and is a theoretical price for a stock that pays out dividends. PPS/EPS could be forward looking (fwd EPS) or trailing P/E (past 12 month EPS). " I guess you don’t see the linkage. Try this: Po/E1 = (1-b)/(k-g), which is jsut a re-write of P0 = D1/k-g.