Word: ratio
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...classic way to gauge a stock's worth compared to its price is the price-earnings ratio, i.e., its market price in relation to profits per share of the company. In the late 1920s, Al Smith's good friend John J. Raskob, who then functioned simultaneously as an officer of Du Pont and General Motors, shocked the investment world by allowing that under favorable circumstances a stock might be worth as much as 15 times earnings. (Despite this bullish tenet, Raskob, like the President's father, Joseph Kennedy, saw the 1929 crash coming; unlike Kennedy...
...great financial institutions remain uninterested in heavy buying, stock prices could scarcely help falling even farther. And in the mahogany board rooms of 'the mutual funds and banks last week, there was growing talk that the right time to buy a stock is when its price-earnings ratio gets down to Raskob's 15 to 1. Since the earnings of all 30 Dow-Jones industrials were running at an annual rate of $36 in the first quarter of 1962, scrupulous adherence to the 15-to-1 rule, notes Executive Vice President Charles Bliss of the Bank...
...they hit new highs," he says. "Too often the highs are death rattles. The really sophisticated investors are liquidating at each rally." Most impressive argument offered by the bears to support their position lay in the hard-won new realism of ordinary investors about growth and the price-earnings ratio. From now on, says Bache's Gordon, "prices of stocks will not increase unless we can really see proof of growth in earnings." Only slightly less pessimistically, E. F. Hutton & Co. Partner Robert Stovall warns: "You don't heal a blast wound with a Band...
Figures below indicate not the price of a stock, but the number of times the price per share exceeds the annual earnings per share. This is called the price-earnings ratio...
...democratic possessiveness about our Letters column. After President Kennedy's set-to with steel, we reported that his action had been popular in the nation. But not, it turned out, with our readers. A reader demanded to know whether the letters we selected to run correctly reflected the ratio of letters we received. When we noted that our mail ran 5 to 1 against Kennedy, an eager reader protested that to judge by the Letters column, readers were 8 to 1 against! Such adding-machine impartiality is not our criterion in picking publishable letters; if it were, we would...