is it correct to say this re: ROE and P/E? correct, company, return, direct

segalm

ROE has no direct effect on P/E, if return is paid out in dividend, p/e decreases, if return is reinvested within the company, p/e increases.


is this statement correct?

flyinggirl

ROE affects PE through the payout ratio

5566

(1-b)/(r-g)=leading P/E

b=g/ROE

(1-(g/ROE))/(r-g)= P/E

as ROE falls so does P/E

bolligerallstar

ROE definitely affects P/E, by altering g.

g = (1-b)*ROE

As ROE falls, so does g. as g falls, so does P/E.

thecfawannabe

grumble Wrote:
-------------------------------------------------------
> ROE definitely affects P/E, by altering g.
>
> g = (1-b)*ROE
>
> As ROE falls, so does g. as g falls, so does P/E.


CORRECTION: g=(b)(ROE)

Other comment holds true.

stalkey

some people define b as the dividend payout ratio instead of the earnings retention ratio. grumble is smart dude I'm sure he knows it is what you keep after dividends are paid out of NI.