PE is simplify term is how many year the company profit can recoup back your initial capital, so lower better or higher better?

Typical undervalued equities would be:

1. Low PE (this can be complicated as PE generally is a past record, one or market always concern about the future/prospect), so in actual term should be low future PE. Looking past PE can be misleading sometimes, becareful about it.

2. Market price < NTA (Doesn't 100% correct especially when company making losses time, it can wipe out the NTA)

3. Market price < the real worth of the company.

For 2&3, NTA doesn't mean is a final truth value of the company, it is just a book value. If company didn't revalue its assets, NTA won't increase either. FYI, NTA increases in two way, either through profit or asset appreciation revaluation.

For Finance stock, market generally uses Price to Book ratio (P/BV) to determine its fair value.

This post has been edited by cherroy: Jan 4 2008, 10:54 PM