Page 242 - 5.2 i. Manac Finance ITC Summarised Notes

Analysis and interpretation of financial and non-financial information

Investor – Price/Earnings multiple (P/E)

• What does it mean?

• Based on historical earnings and current market price

• Number of years ‘earnings’ a buyer is prepared to pay per
share (ignoring growth in the above)

• High P/E relative to market (peers)

• Positive assessment of company

• Also of management, product, market
• High expectation of future profit OR

• Market not adjusting to poor performance

• LOW P/E opposite arguments

• Future P/E, adjust profit/EPS with existing or forecast
growth

242