Based On The Revised P/E Ratio Method Of Stock Valuation Research

Based on the theory of effective market P/E ratio in the theory and practice by scholars and investors is widely used at home and abroad and research,the revised P/E ratio is established on the basis of the P/E ratio index,effectively make up for the pure rely on P/E ratio for equity valuation and not considering the defects of expected growth.But due to the comparable companies of the modified P/E ratio method to choose the lack of standard,the model specification is too simple,differences between subjective corrected P/E ratio as a result of adjustment in practice did not get the attention they deserve,and in the securities market in China using the value of the modified P/E ratio method to guide the research of investment less.Comparable companies choose to revised the P/E ratio method and correction factor to determine the valuation accuracy is of great significance,this article from the two factors on the revised P/E ratio method is analyzed.First,this paper from two aspects of comparable companies to choose and modified P/E ratio method to carry on the literature review,and literature review on theory development.Then,in the real estate industry,for example,to the industry P/E ratio,fixed P/E ratio of descriptive statistics,indicators can be seen from the distribution of discrete degree is higher,differences between individual stocks,not directly based on the valuation of the modified P/E ratio of the average.Then,in our country is in weak type of effective market conditions,to build a system of financial indicators,according to the system using factor analysis and cluster analysis to select company is subdivided into several sub industry.After solved the problem of the comparable companies choose to sustainable growth rate as a correction factor,calculate the average of each industry have revised the P/E ratio.Compared with sustainable growth rate as the correction factor,earnings per share growth rate as a correction factor,in theory is appropriate.The reason is that the sustainable growth rate is a company with the current management policy and financial policy going concern can achieve growth,is a kind of expectations for future development of the company growth,and earnings per share growth rate is a reflection of the past growth rate.Finally,in accordance with the principle of random selection of sample companies,using the sample companies in the sector average correct P/E ratio,to estimate the sample company.According to the result of the valuation of the modified P/E ratio method deviation rate of 23.07%,according to the P/E ratio method,the result of the valuation deviation rate of 38.33%,thus we can get correct P/E ratio method can improve the accuracy of the valuations.