Trading Multiples
The Price-to-Earnings Ratio or PE Ratio is commonly used as a benchmark with regards to stock from the same industry. In fact, companies from the same industry with similar exposure tend to trade at similar PE Ratios.
Of course, exposure to an emerging market may be positive, whereas exposure to a recessionary market can be a negative. Most know that rationale, but how much does exposure affect the ratio?
Or how much does active R&D help the PE Ratio? Or the strength of its product line innovation?
I doubt the analysts really know, since that would probably demand an in-depth understanding of a company beyond what is commonly known to the public.
So if even analysts are blind to these factors, what more the ordinary investor?
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