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

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Chapter 12. Decomposing the P/E

As we have seen previously, there are many influences on the P/E that cannot be ascribed to the company itself. Four in particular should be clear to any experienced investor and are explained below. I do not claim that this is an exhaustive list. Indeed there are almost certainly other influences on the P/E that I have not allowed for. However, these are the factors that are considered in the work that follows.

Could allowing for how these influences affect the P/E make it a more useful statistic? This is what I try to answer in this and the following chapter.

Note that, building on the previous chapter, all the P/Es referred to from now on are the ten-year P/E, i.e. the P/E calculated using the average of ...

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