FAST GROWERS:
• Investigate whether the product that’s supposed to enrich the company is a major part of the company’s business.
• What the growth rate in earnings has been in recent years. (My favorites are the ones in the 20 to 25 percent range
• That the company has duplicated its successes in more than one city or town, to prove that expansion will work.
• That the company still has room to grow
• Whether the stock is selling at a p/e ratio at or near the growth rate
• Whether the expansion is speeding up
• That few institutions own the stock and only a handful of analysts have ever heard of it
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These are some lessons that peter lynch thought us in one up on wall street
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Similar ideas
• These are big companies that aren’t likely to go out of business. The key issue is price, and the p/e ratio will tell you whether you are paying too much.
• Check for possible diworseifications that may reduce earnings in the future.
• Check the company’s long-term growth rate, and ...
THE PRICE/EARNINGS RATIO
We’ve gone on about this already, but here’s a useful refinement: The p/e ratio of any company that’s fairly priced will equal its growth rate.
I’m talking about growth rate of earnings here. How do you find that out? Ask your broker what’s the growth rate, a...
Let's say that a company's stock trades for $100 and that the company has earnings per share (EPS) of $6.50 over the last 12 months.
We can calculate a trailing ("last 12 months") P/E ratio for that stock by simply dividing the stock price ("P") by the EPS ("E"), so 100/6.50 equals about 1...
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