In this video I analyze Information Services Corporation (ISV on the Toronto Stock Exchange), from a dividend investing perspective.
In this video I try to give an in-depth description of the Price to Earnings (P/E) Ratio. It's geared towards beginning investors, so I've tried not to use too much jargon and to explain things from scratch. First we talk about the meaning of the term, how it's calculated and how to get an idea of what the meaning of the P/E Ratio is for a company, both as the number of years needed to generate enough profits to buy one share, and also as the Earnings Yield (the inverse of the P/E Ratio). Then we discuss the limitations of this financial metric: the inability to value companies without earnings, the uselessness of it to study companies with large depreciation or amortization costs, like REITs, and finally the fact that it only captures and compares to pieces of information: the price and the earnings per share. Finally, I give some advice on how to best use this ratio to value companies, and we talk about a fairly common and major mistake when analyzing cyclical companies s...