Copy pasting Aastro Guru’s comments as an Answer
"P/E is applied to all scrips and when you want to identify for a specific stock whether is of overvalue or undervalue, you need to compare the P/E of the industry standard.
For example if you want to see whether TCS is of overvalue, you should compare P/E of TCS with P/E of average IT sector.
If P/E of TCS> P/E of IT sector, then TCS share price is already of overvalue
otherwise undervalue.
I dont know whether any site gives P/E charts.
But it can be calculated in Excel.
P/E changes everyday and hence should be viewed as day chart etc.
For TCS, the industry standard would be CNX IT.
All scrips come under certain sector likewise, REALTY, PHARMA etc.
You need to plot both the Stock’s P/E and index’s P/E to understand the rise and fall of P/Es
But if you simply want to see only the value of P/E (only for today), you can check in moneycontrol for both TCS and CNXIT. Hope you get it!"
P/E is applied to all scrips and when you want to identify for a specific stock whether is of overvalue or undervalue, you need to compare the P/E of the industry standard.
For example if you want to see whether TCS is of overvalue, you should compare P/E of TCS with P/E of average IT sector.
If P/E of TCS> P/E of IT sector, then TCS share price is already of overvalue
otherwise undervalue.
thanks AastroGuru. Where can I find industry P/E metric?
I dont know whether any site gives P/E charts.
But it can be calculated in Excel.
P/E changes everyday and hence should be viewed as day chart etc.
For TCS, the industry standard would be CNX IT.
All scrips come under certain sector likewise, REALTY, PHARMA etc.
You need to plot both the Stock’s P/E and index’s P/E to understand the rise and fall of P/Es
But if you simply want to see only the value of P/E (only for today), you can check in moneycontrol for both TCS and CNXIT. Hope you get it!
yep, all clear mate. why did u not write as a reply? i could have selected ur answer as ‘Best answer’, so clear and precise. thanks!!
I thought, Karthik (EQ research expert) would be the one to give the exact answer. Hence initially I have written as comment and thought he would reply this thread.
---- Also one more point of caution:
Buying the stock based on P/E value (overvalue or undervalue) is incorrect.
If someone is suggesting to buy a stock just because of its P/E value is too low, please ignore that.
P/E value alone cannot predict the stock’s future trend.
P/E works well on index (when historical cycles are analyzed) not on stocks.
A stock with undervalue P/E could become more low compared to current value and keep on decreasing (which could not be what you have expected, you might have expected an uptrend sooner or later, because the stock is already undervalue). So please exercise caution.
