11 votes

Some companies like vanguard and blackrock/ishares exclude losing companies from price to earning ratio calculations, where can I find reliable pe numbers?

For example Vanguard Russell 2000 Growth ETF shows a pe ratio of 19.5 on it's portfolio page, but etf.com (which reportedly calculates PE ratio in the "logical" method we probably all think of) says it's 236.89.

There is also the russel 2000 etf, which shows 14.3 on vanguard and 43.63 on etf.com (I saw no clear indication on the vanguard website they are removing losing companies), ishares does say that for it's etf.

I want to know the PE ratio because economic bubbles (like the dot comm bubble and japan stock market bubble) were characterized by very high pe ratio, and there is historical evidence low pe performs better (probably because of the optimism bias).

I can use etf.com, but would like another source to validate etf.com is reporting correctly .

4 comments

  1. skybrian
    Link
    Yeah there are a lot of problems with this ratio. Consider two companies that are close to break-even. One of them has a slight profit and the other a slight loss. The first will have a very high...

    Yeah there are a lot of problems with this ratio.

    Consider two companies that are close to break-even. One of them has a slight profit and the other a slight loss. The first will have a very high P/E and the other a very negative P/E. There is an asymptote at zero, making the companies seem very different though they're actually similar.

    I suppose adding up prices and earnings separately is better in some ways but it will bring P/E of the aggressive closer to the asymptote.

    Ultimately the issue is that past earnings aren't predictive of future results, and stock prices are mostly about predictions of future revenue. The P/E tries to get at how much prices depend on predictions of growth that might not materialize. In the case of a money-losing but growing company, no earnings have been established and it's all based on predictions. There may be an assumption that the company is investing in growth and can cut spending later.

    3 votes
  2. [3]
    HotPants
    Link
    I don't have any answers, I just want to empathize. I've tried to replicate how the PE ratio is calculated for ETFs, and have completely failed. E.g. ETF gives CLOU a PE ratio of -541.35, where as...

    I don't have any answers, I just want to empathize.

    I've tried to replicate how the PE ratio is calculated for ETFs, and have completely failed.

    E.g. ETF gives CLOU a PE ratio of -541.35, where as I get 254.17...

    1. [2]
      wiki_me
      Link Parent
      That's a reasonable difference, in term of earning yield it's -0.0018 vs 0.0039, It could be attributable to some measurement error (the time the data was taken), Is it the result of code you...

      That's a reasonable difference, in term of earning yield it's -0.0018 vs 0.0039, It could be attributable to some measurement error (the time the data was taken), Is it the result of code you wrote that you can share with me?

      Maybe openbbterminal could provide this functionality , but currently linux install is a hassle so i haven't tried it.

      1. HotPants
        Link Parent
        I just plugged ttm earnings and market cap into a spreadsheet. I could try to dig it up when I am back home if you are interested, but the ttm earnings data is now undoubtedly stale.

        I just plugged ttm earnings and market cap into a spreadsheet. I could try to dig it up when I am back home if you are interested, but the ttm earnings data is now undoubtedly stale.