Valuation

People who put this axis first look at the price, not the company. A good company and a good price are different matters, and this view holds that if you pay too high a price for even a very good company, its goodness is already in the price.

The strength of this view is that it sees what the other three axes miss. Earnings, financial health and dividends all measure what kind of company it is, and however good those three are, they do not tell you what price you are paying. PER and PBR are the only metrics that fill that gap.

The value on this axis, though, is set by the market, not made by the company. A low PER does not in itself mean the company is priced below its worth. It means the market currently puts a low multiple on these earnings, and the reason is not contained in the PER.

This axis is not part of the Jupick grade. PER and PBR are shown on the stock page but contribute not a single point to the overall grade. If you put this axis first, Jupick’s grade badge is not measuring what you consider important.

There is usually a reason for a low PER. That reason is written not on this axis but on the financial health or earnings axis.

The natural level of PER differs by industry. Comparing multiples across industries makes whole industries look low-priced or high-priced.

For a loss-making company PER cannot be calculated, and for a company with few assets PBR comes out abnormally high. This axis often produces companies with no value.