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Using P/E Ratios to analyze investment RE values

Like Capitalization Rate, P/E ratios are a quick and easy way to determine whether a particular investment opportunity warrants further discovery.

Do others use P/E Ratios or do you have another technique that gives you what you're looking for?

Posted by Andrew Lietzow-MBA, GRI on 05/12/2007 04:51 PM

Comments (4)

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4 Comments on Using P/E Ratios to analyze investment RE values

MAY

2007

P/E is fine to use to value company stock. I personally prefer looking at P/B (Price to Book). The lower the better. Book value can be an indicator of whether a company is undervalued. Of course, you'll want to make sure that the fundamentals of the company are in good shape.

SEP

2007

Andrew,

I am asking you for your recommendation of a good and logical to operate, worth the money spent ,
..... for a Real Estate Investment Analysis Software for : CAP rate, IRR, ROI, cash on cash , cash flows, graphs, etc.
Thanks you for any leads,which I will share with others !
John Vostenak
http://www.johnvostenak.com/
john@johnvostenak.com

SEP

2007

Hi Investblogger,

Yes, the Price to Book ratio tells you a lot about a stock's value. However, the company could be throwing off loses, i.e. have a negative P/E ratio (negative cash flow) and still have a decent, if not strong P/B. A quick financial screen on Yahoo.com will turn up plenty of these, I'm quite certain.

Also, P/B does not equate to CAP rate. Again, the Capitalization Rate is based on NOI/Price - Net Operating Income to Price. CAP Rate answers the question (albeit, entirely too succinctly), "How efficient is this property at creating wealth for the owner"?

This ignores the fundamentals and other requisite dull diligence requirements but it does answer the all important question, "What is this property's P/E ratio?".

At least that's how I view it. I'm open to other viewpoints.

SEP

2007

Hi John Vostenak,

Google searches should help with that. I use REAP from Dolf de Roos, the CRS template for FMRR (from CRS-204), and most recently, "The Flipper's Cash Flow Analyzer" Software from Doug Rutherford (see http://LandlordSoftware.com -- don't say I never gave you nothing)

Incidently, please don't share this last one with anyone. I'm trying to keep this insider's secret all to myself! :^)

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