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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 13. A Cautionary Tale: The Naked P/E

The Naked P/E is the same thing as the ‘idiosyncratic P/E’ used in the previous chapter. Every company has a different P/E, even compared to another company at the same time, operating in the same sector and having the same market capitalisation. Thus the ‘Naked P/E’ is that part of the P/E that can’t be attributed to the year in which the company’s P/E was measured, the sector it was operating in or its size, as I explained at the start of the previous chapter. At first I named this part of the P/E the Idiosyncratic P/E, and it is called that in Chapter 12. At the suggestion of a colleague with a better nose for promoting a new idea than I have, it soon became the much snappier Naked P/E.

It turns ...

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