I just copy from a website. But sometimes higher P/E ratio may show that the stock's prospect is good.
I am afraid of bearing high risk. For me, high dividend is a MUST in the investment, though I am quite conservative.....
Do u really want a piece of Ping An? (Quoted from Quamnet - I am not saying I am pro Quamnet, I just received its email & would like to share with u all here) - In short, its P/E is quite high & same story as China Insurance, beware!
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IPO stories are always interesting, largely because they reflect the lengths to which those doing the selling will go in order to foist their offerings on buyers.
In the case of Ping An's plan to go public in HK, The Standard reported that the $9.59-$11.88 price range represented what lead manager Goldman Sachs called an "embedded value" of 1.98 to 2.23 times.
False Precision
First, note the false precision implied by the two decimal points, as if that lends an air of scientific legitimacy to calculations that are by nature scenario-driven guessing. Business valuations are based on a large number of assumptions, most of which usually turn out wildly wrong due to the simple reality that the future is generally somewhat unpredictable.
Valuations tend to be made using numerous growth and cash flow predictions with key variables including interest rates, market share, pricing power, internal cost structure, and so on and so on, looking three or five or ten years into the future. Valuations are frequently revised as new information becomes available, leaving the original predictions forgotten, as if the new revisions were any more accurate, those revisions of course themselves subject to future revision.
That's not to say one should not try to develop a reasonably informed picture of potential developments, but going beyond simple scenarios such as fast versus moderate versus slow growth is often no more than an attempt to justify the salaries of those who slaved away in b-school finance classes only to find grade school math more than sufficient.
So really, why the added "precision"?
Metric or Imperial?
Second, note this "embedded value" term, which represents both NAV and the estimated value - again, a bit of a joke - of the business. Goldman is apparently promoting this new yardstick instead of more familiar ones like P/E and P/B.
The point of a yardstick is to allow a common way to measure whatever needs to be measured. If you are used to measuring things in feet, being told to use meters is confusing enough. Now imagine you have to measure your height but using "percentage of Yao Ming" as the barometer. Doable, but hardly meaningful unless you were a basketball scout, and even then wouldn't simple feet be a superior measure? What we really want to know is the height, and in a form that means something to us.
Thus this introduction of a new yardstick does nothing to improve our ability to judge that which needs to be judged.
Using a More Familiar Yardstick
To put the figures back into a form relevant for most investors, the top end HK$72 billion initial market cap on the 6 billion shares to be outstanding works out to a historical P/E of 33.4369 times (check out that Goldman-like precision!). Ping An is expected to make a profit this year around Rmb 2.7 billion, or HK$2.54 billion, for a forward P/E of about 29 times. I don't know what the NAV is, so I can't give you a P/B, but we'll let Quam's analysts crunch more of the numbers for you when they become available.
I don't know how to interpret a 2.23 embedded value score, but I can say that with P/Es around 30 times, Ping An is certainly not cheap. For comparison, established financial powerhouse HSBC's P/E is 18x. And HSBC clearly deserves the premium.
Peace for a Price
Even analysts cited by the press agreed it will be an expensive IPO. But don't you love the rationale for buying it anyway? One broker said, "I think the stock will benefit from the positive market sentiment as it is approaching the mid year window-dressing period."
Forget fundamentals! The market's in a good mood! And mutual fund managers will want it in their portfolios for window-dressing reasons!
Just the day before, the SCMP reported on the rise and fall of Pearl Oriental. Remember that one? Once the darling of the market? How many portfolios is it in now?
You have to realize that while initial hype may lead to a share being popular, in the end it has to prove itself worthy of the popularity. In other words, it has to be earned. And that means - in the case of stocks, anyway - fundamentals.
Other Considerations
Ping An is suffering the same sort of problems as China Life with its high guaranteed returns on earlier policies and inability to reinvest at better rates due to the low interest rate environment. Rates may have bottomed, but that doesn't mean they're going through the roof anytime soon, or to levels where Ping An and China Life can break even on those earlier policies.
Meanwhile, one has to wonder if some of the shenanigans over at China Life won't be repeated at Ping An. No reason to think they will, but weak internal controls is surely not a problem limited only to China's industry leader.
Yes, China is a huge, growing market. But folks seem to forget that with higher reward potential comes higher risk of loss. I'm not against investing in Chinese companies, but at least make a decision based on relevant, established value measures and not just because some big names (Lee Shau-kee, Thomas Kwok) are rumored to be interested, or because "the market's looking cheery!", or because "it's the great Chinese market!"
Ping An may be an insurance company, but that doesn't mean your investment is an assured winner.
May be this stock could be for long-term according to its business nature. Today is the its first day in stock market, the price is $10.4, the price of the stock is $10.3. So we all hold for a while. May be there should be chance for 10% or even 20% up. "蒙牛" got such 20% up.(even thought they are entirely different business nature, so on and so on). I think its potential should be better than 蒙牛.
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/E not reasonable"? Depends on what factors be regarded as reasonable? 
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