Analysis Of The Application Of P/E Valuation Method In Value Investment Of China A-share Market

P/E ratio is a numerical comparison with the share price and EPS.It reflects the relationship between share price and corporate profitability.It is one of the most fundamental valuations for value investment,which is usually used to measure the profit and operation of a listed company.But the P/E ratio is calculated based on the history and current accounting data,and its form is only one value,which may not accurately evaluate the real value of the listed company.Usually,it needs to compare and consider other factors.However,the A-share market in China is still in the stage of development and transformation,and the market environment is more complex.So it is not easy to apply the P/E valuation method easily and efficiently.To solve this problem,starting from the theory of value investment,uses financial analysis methods to interpret real data,and analyzes and quantifies the key elements of enterprise valuation based on P/E ratio,building the establishment of multifactor quantitative model to test the P/E valuation method in A-share market.This paper is an exploration and analysis of the application of P/E valuation method in A-share market,and it can also provide references for other investors.The paper briefly introduces the basic concepts and theories of value investment.From the specific value of good basic investment analysis of the three dimensions,including enterprise valuation,industry status,market environment,the paper discussed how to interpretate and applicate enterprises,industries and market P/E ratios in the A-share market.Then,based on the analysis and research,combined with the price earnings ratio index and the enterprise’s revenue and cash flow index,a multifactor quantitative model based on the P/E ratio valuation method is established,and the validity of the model is tested empirically with historical data.The research methods used include literature review,data collection and quantitative analysis method.The research and analysis of the advantages and disadvantages of the P/E valuation method,and the quantitative models established and the measured results will help investors better understand and apply the P/E valuation method to try value investment in the A share market.