Post #100 by mechinv on the Index Investing board

If someone appears to be repeatedly personal, lean towards patience as they might not mean offense. If you are sure, however, then do not deepen the problem by being negative; instead, simply place them on ignore by clicking the unhappy yellow face to the right of their name.

- Manlobbi

Investment Strategies / Index Investing

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So PE = PB / (Return on Equity) as you observe.

It doesn't seem to work that way in practice. Here are the P/E, P/B and RoE figures for Apple (AAPL), for example, as taken from Yahoo Finance.

https://finance.yahoo.com/quote/AAPL/key-statistic...

Apple (AAPL)
P/E = 33.0
P/B = 43.9
RoE = 147.25%

Note that the units for P/E and RoE are completely different. The RoE is reported as a percentage, whereas the P/E is not.

If you convert the 147% RoE to the decimal number 1.47, and divide the 43.9 PB by 1.47 you get 29.9, which is not the same as 33.

I did the same exercise for META, and got PB/RoE = 25 whereas the actual PE is 29.

So, for 2 of the biggest companies in the US, the PB/RoE ratio is about 10% lower than the P/E ratio (at least, as reported by Yahoo Finance).

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