First: look at the price-earnings ratio of stocks.
P/E ratio = share price/earnings per share. If the stock price is too high, it means that the stock price is overvalued. If the stock price is too low, it means it is undervalued. P/E ratio includes dynamic market profit rate and static P/E ratio. Generally speaking, dynamic market profit rate is more effective than static P/E ratio. Because the calculation basis of the two is different: dynamic P/E ratio = total market value ÷ latest annualized net profit. If the latest net profit is quarterly, the annualized net profit is equal to net profit 1 quarter ×4. Static P/E ratio: total market value ÷ net profit of the latest annual report.
Second: compare the stock prices of Hong Kong stocks.
Some stocks are listed on A shares and H shares. Generally speaking, the P/E ratio of A shares and H shares is not far from the stock price. However, the share price of A shares is generally higher than that of H shares. As long as the premium rate of A shares is lower than 100%, it is relatively safe, that is, if the price of A shares is twice as high as that of H shares, it may be overvalued.
Do you choose high or low stock valuation? The lower the stock valuation, the better. Investors buy stocks when the evaluation value is low, and the time to get the maximum income is short. Even if you buy stocks with low valuation, you can't lose money completely. If investors hold it for a long time, investors will have a chance to get very high returns. Compared with high valuation, the risk of low valuation stocks decreases sharply with the extension of holding time. If the fundamentals of listed companies are general, but the stock price is wildly hyped by the market, resulting in a higher P/E ratio of individual stocks, then the subsequent rise of listed companies' stocks is limited, and the stock price bubble is large, which may lead to the risk of falling back. If the price-earnings ratio of a stock is relatively low, it means that the valuation of this stock is relatively low, and the probability of a subsequent rise in the stock price is high.
What do you think of stock valuation? The above article tells investors two main ways, hoping to help you! Learning and investing in stocks is a long process. Investors must know more. Click QQ: 100800360 to add our customer service staff for consultation.