Question

What is the current PE ratio for Alibaba and give two reasons why it's justified commenting on its growth?

Answer 1

ALI BABA PE RATIO - 47.93

Current and historical p/e ratio for Alibaba (BABA) from 2011 to 2020. The price to earnings ratio is calculated by taking the latest closing price and dividing it by the most recent earnings per share (EPS) number. The PE ratio is a simple way to assess whether a stock is over or under valued and is the most widely used valuation measure. Alibaba PE ratio as of October 20, 2020 is 47.93.

COMMENTS ON GROWTH OF P/E -

1.The P/E ratio helps investors determine the market value of a stock as compared to the company's earnings. In short, the P/E shows what the market is willing to pay today for a stock based on its past or future earnings. A high P/E could mean that a stock's price is high relative to earnings and possibly overvalued. so a P/E of 48 is considered high so it is trading at premium

2.

companies that grow faster than average typically have higher P/Es, such as technology companies. A higher P/E ratio shows that investors are willing to pay a higher share price today because of growth expectations in the future.] which means investors of ALI BABA are willing to pay per share for every dollar earned by the company.

3.Investors not only use the P/E ratio to determine a stock's market value but also in determining future earnings growth. For example, if earnings are expected to rise, investors might expect the company to increase its dividends as a result. Higher earnings and rising dividends typically lead to a higher stock price because ALI BABA gives regular dividends it improves it P/E as well