pe ratio fallacies

Santoo and ragingbull have been bandying around a 7 times price earnings ratio, in order to give some futuristic price of KAB in 3 or more years time.

The price earnings ratio shows how much time, in years, it will take for your share purchase to be covered by earnings.

Firstly, PE ratios are only used for producers earning regular income, with ability to determin future sales and expense reliability. Non of this exists here, so this is just a sales method to entice others in because of some future ficticious price.

All that aside, lets look at the figure 7 itself for credability. For a starter, miners have lower ratios than industrial stocks, with technology having the highest.

Check out BHP PE 8.21, a multi billion coy with strong predictability and a very extended list of diversified resources that will produce for many decades. To suggest KAB with no reliable figures of resource, financial returns and future indefinite as yet, to be a 7 would certainly be assuming a hell of a lot.