SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Stock Attack II - A Complete Analysis
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Lee Lichterman III who wrote (38367)7/24/2002 10:42:29 PM
From: Haim R. Branisteanu  Read Replies (1) of 52237
 
Lee, the P/E ratio is not defined from thin air it has to do with the return on investment and real life business valuation. If 25 years ago to establish a manufacturing facility with an output of 1000 wigets per month you needed $500,000 for machinery and equipment and $500,000 for inventory including raw material WIP and finished goods your investment was $1,000,000.

At the time inflation was around 4% and treasury paid you 7.5% from there you have the P/E of 15.

Now with just in time inventory at double the inventory turn you need only $250,000 in inventory and $500,000 for equipment or a total of $750,000. Inflation is 2% and treasury pays you 5% so you should do the math to how much P/E it translates.

1,000,000/750,000 x 15/5x7.5 = P/E 30. the net income on your investment is the same as before when you needed $1,000,000 and due to lower inflation your fiat money buying power depreciate less.

It is a simplistic explanation but true
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News