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Philip ( Random Walk Theorist)
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Posted by Philip ( Random Walk Theorist) > 2020-04-25 17:26 | Report Abuse
One thing I always try my best to convince new investors is to forget about this ludicrous concept. PE in no way shape or form gives you any indication of how "long" it will take to recoup your investment. It is simply a measure of the confidence Mr market has in the company. As a real comparison for example, take STAR MEDIA for example. Does the fact that it is selling at PE49 mean it will take 49 years to earn back your investment? Obviously not. Why? Assets and cash and borrowings are not reflected in PE.
In fact, if you could cough up 280 million in cash to buy out, you would immediately get 380 million in cash, on top of additional factory and property, and zero borrowings. Not bad for paying pe49 to recoup immediately the money used to buy the company.
How is that related to any return on equity?
>>>>>>>>>
Another way to look at PE is the number of years one required to recoup the money used to buy the company, that is 54 years based on RM 8 per share (close 24/4/20).
Happy investing.