you take the price per share and divide it by the earnings per share and this will give you the PE ratio. Most of the time you don't even have to find out the p.e. ratio because It will be calculated before hand , so all you have to do is look at it. Many analysts like PE ratios under 60 or so, but it depends on the industry PE ratio also ( another figure that is pre calculated) (Frailey ,50). This is one of the most important figures of a stock. Try to avoid buying stocks with high PE ratios for long term holdings, even if it's a good company. For example Cisco Systems is a fantastic company, it has split nine times in the last ten years, it has never disappointed Wall Street with earnings but with a PE ratio of 125 this stock is over valued. I would buy this stock at about fifty dollars a share with a PE ratio of about 60. Even the best companies get over valued. Buy stocks like Cisco on short term pull backs and sell them when they become over valued.It is important to develop some type of trading system that will protect your capital and extend your gains. I do not think there is one trading system out there that will apply to every stock, so what you must do is modify other systems and develop your own ( "cut and paste" ). The "pyramid system" is the most practical and useful trading system in the world. In this particular system you start off with about ten or so individual Morgan 3stocks that you think will do very well. There is no way around it, some stock will go up and some go down, face it. In this particular system you will sell your stocks that decline by ten percent. Now that you have liquidated some of your stocks you must have a place to put the money. You will then put that money into your stocks that are going up. Typically the stocks that start to do well will continue to do so and the ones that do bad willalso continue (Snell 4). You now have started your pyramid system. Selling your stocks is o...
