The price chart shows that the price for Nestles has gone up from Rm 85 in early October 2017 to close at Rm 113 on the last trading day. It has gone up 33% in about 4 months. I must congratulate all the shareholders for the fantastic performance. Remember the shareholders are responsible for moving the share price up or down. There are more buyers than sellers every day. As a result, the price is going higher and higher. It is defying common sense logic.
Nestles’3rd quarter EPS was 51 sen and the total EPS for 3 quarters was Rm 2.18. Assuming its 4th quarter EPS is the same as its 3rd quarter, the EPS for the full year will be Rm 2.69.
That means Nestles is selling at P/E ratio of 42 (Rm 113 divided by Rm 2.69 = 42).
I see so many tors in i3investor rejoicing and congratulating one another. They are boasting that they did not sell their holdings.They do not seem to know what is P/E ratio. If they knew the true meaning, they would have sold their holdings.
It means the current share price is divided by its earning per share for the financial year. P/E 42 means that if the company pays out all its earning to the shareholders every year, it will take each shareholder 42 years to recover the cost for buying the share at Rm 113 per share.
My advice to all the shareholders is to open their eyes to see that EPS has been selling every day in the last few weeks.
Remember, no share can go up continuously for whatever reason. Eventually the price must fall. Also remember profit is not a bad word.
As I said many a time, to be able to maximise your profit in the stock market you must be able to control your emotion of greed and fear and to think logically. In this case, all the shareholders are really smart to have picked this stock but they are greedy to expect the price to go up higher. They will soon regret.
This reminds me of my very expansive lesson when Hengyuan shot up to Rm 19.20 a few weeks ago and I did not sell while holding a lot of shares.