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The Essential P/E: Understanding the stock market through the price-earnings ratio by Keith Anderson

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Introduction

Who needs a book on the P/E?

In recent decades the P/E has been the most important and best-known investment ratio. Indeed, apart from the share price, it is the only investment statistic that is published in print every day. Every share quoted in London has its P/E printed daily in the Companies section of the Financial Times. The P/E also has a strong intuitive meaning: it tells you how many years’ worth of future earnings you are paying in order to buy the share now.

One might ask why there hasn’t been a book before on the P/E.

On the other hand, if you are a fund manager, the P/E or something based on it will be just one of the battery of ratios you use. You will have a filter of many different investment ratios that ...

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