🎯 Goal: See how P/E shows years of earnings paid, and use it to compare firms.
P/E = Price ÷ EPS — "how many dong you pay per 1 dong of yearly profit". P/E 10 means paying 10 for 1 of profit, roughly a ~10-year payback if profit holds. In reverse: fair price ≈ EPS × the sector P/E.
Let’s explore
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P/E = price ÷ EPS. Low P/E = fewer years of earnings paid; high P/E = the market expects growth.
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Compare two firms in one sector: a lower P/E MAY be cheaper — or troubled. Understand why.
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Reverse it: fair price ≈ EPS × sector P/E. A quick way to estimate a stock's value.
Practice activity
🧮 EPS 2,000đ, sector trades at P/E 12. Fair price per share?
Worked example: Price ≈ EPS × P/E = 2,000 × 12 = 24,000đ. If the stock sells at 18,000đ, its actual P/E = 18,000 ÷ 2,000 = 9 — cheaper than the sector; worth asking why.
Quick quiz
1. How is P/E computed?
→ Price ÷ EPS
2. P/E 10 means?
→ Pay 10 for 1 of yearly profit
3. EPS 3,000đ, sector P/E 11. Fair price?
→ 33,000đ
4. Price 30,000đ, EPS 2,500đ. P/E?
→ 12
5. A high P/E usually reflects?
→ High growth expectations
🎯 Real-life mission
Pick 2 companies in the same sector on the stock market and look up each one's P/E. Write 2–3 sentences guessing why one has a higher (or lower) P/E than the other.