The price-to-earnings ratio (P/E ratio) of the capital market has jumped to 21.16, the highest after the 2010 bubble.
The PE ratio was 29.16 in December 2010, when the then broader market index, DGEN, was trading at an all-time high.
According to Dhaka Stock Exchange data, the weighted average PE ratio reached 21.16 on September 9, which was 10.78 in June 2020, an all-time low.
The former chairman of BSEC Mirza Azizul Islam said, if the overall market PE crossed 20, it was the high time to be caution. Some companies have already become overvalued.
On the other hand, share prices of many junk companies have skyrocketed in the recent rally. The investor’s decision at investment is not ethical.
Since July 1, 2020, the DSEX has soared by 3,285 points, or 82.68 per cent, to close at an all-time high of 7,258.74 points on September 9.
Out of the 340 companies (except mutual funds), there are 107 companies of which PE ratio crossed 40 on September 9. Companies having PE ratios over 40 are considered as the most risky shares for investment.
Bank posted the cheapest PE ratio of 8.6 on September 9. The energy sector’s PE ratio was 14.5.
Source: The Financial Express