Module 31.4 LOS 31.h: Relating Justified PE to Justified PS and Justified PB

From the justified PE equation we can derive several relationships to PS and PB ratios:


V0 = fundamental value

D0 = dividend just paid

D1 = dividends expected to be received at end of Year 1

r = required return on equity

g = dividend growth rate

We can see for example, that the P/S ratio is net profit margin x justified trailing PE.

Table of Contents´╗┐

Leave a Comment