PE to EPS ratio

24th Nov '23 by Abbas

5 comments 398 reads

Hi everyone

I wonder if there is a way of finding out the cheapest stock with maximum growth by comparing PE to EPS ratio’s. or vice verse.
is there a calculated PE to EPS ratio for stocks?
Can such a ratio be reliably compared to find the cheapest stock with the maximum growth assuming all other factors are the same.
I get confused when I compare a stock like Okta to Alibaba.
for instance, Okta has a PE to EPS ratio of 0.0001 while Alibaba has a ratio of 0.5
Can I deduce from the above ratio’s that Okta is cheaper than Alibaba or better value for money.
thank you.

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About the Author

Abbas

Premium Member

5 comments

XTR

24th Nov '23

Hi Abbas,

The E in PE is already EPS, so what you're proposing is P/E^2, what would be the benefit?

If you're looking for a valuation ratio with growth component, try PEG. I usually check this myself, anything less than 1 is positive.

XTR

24th Nov '23

Regarding Okta (NSQ:OKTA), they are not making any money so P/E is unavailable. Loss making companies can be valued using P/Book or P/Sales.

Abbas

26th Nov '23

Thank you for the info.
what I am trying to find is whether stock A with EP ratio of say 20 and EPS growth of 40 is the same as stock B with an EP of 40 and and EPS growth of 80.
thanks.

Edward Croft

26th Nov '23

If I interpret you correctly, I think you might be looking for the PEG Ratio.

That's the P/E Ratio divided by the EPS Growth rate.

Growth investors typically use a PEG ratio of less than 1 to identify "growth at a reasonable price" shares.

You can find a variety of PEG ratios in the screener.

Abbas

26th Nov '23

Hi Ed
Thank you for the info.
I was hoping I could compare the stocks like comparing the cost of two batteries; one costing £2 and running for 10 hours with another one costing £1 and running for half the time. which one should be bought if I only had £2 for this purpose? I guess this method of comparison doesn’t work in stock pics.
kind regards
Abbas

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PE to EPS ratio

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About the Author

Abbas

5 comments

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