Bridge over ocean
1 May 1966 Financial Analysts Journal Volume 22, Issue 3

Prices, Earnings and P-E Ratios

  1. James D. McWilliams

This article evaluates the usefulness of the price-earnings ratio as an analytical tool. Based upon a sample of 390 stocks over the period from 1953 through 1964, the study shows that better investment performance can be obtained from a portfolio comprised of low price-earnings ratio stocks as contrasted to portfolios made up of high price-earnings ratio stocks. For individual securities, the author also concludes that good performance may be found among stocks selling at almost any price-earnings ratio. However, the very poor performers are most frequently found among those stocks selling at large premiums relative to earnings.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.