band charts - notes

BAND CHARTS – P/E, P/BV, P/CF

BAND CHART SAMPLE DATA

With the above data we can calculate the historical PE ratios (Price Per Share / Earnings Per Share). We can plot

the historical PE ratios. However, just the PE ratio graph may not give us the required interpretation. We may look

at even a higher version of the PE ratio graph known as Band Charts.

WHAT ARE BAND CHARTS?

Band Charts are also made on the same data as the Ratio Charts. However, the Y-axis of band charts provide the

Price Per share as compared to PE ratio as given in the Ratio Graph. This kind of a graph is one of the most

important graphs used by Research Analysts for their reports. The Band is drawn between the maximum PE and

the minimum PE for the stock.

Date Price High Low EPS Fwd PE

02Mar2002 243.97 250.25 230.98 28.9580 8.4249

09Mar2002 232.38 256.73 231.78 29.0113 8.0100

16Mar2002 233.44 234.77 220.57 29.0647 8.0318

23Mar2002 230.26 236.66 224.92 29.1180 7.9078

30Mar2002 227.72 229.84 223.41 29.1713 7.8064

06Apr2002 231.21 237.00 224.96 29.2831 7.8956

13Apr2002 225.98 233.52 222.73 29.4290 7.6789

20Apr2002 215.38 227.12 213.94 29.5748 7.2825

27Apr2002 218.45 223.29 212.46 29.7207 7.3500

04May2002 218.11 219.36 205.23 29.8665 7.3027

11May2002 218.52 224.01 216.25 30.0124 7.2811

18May2002 212.69 219.39 208.26 30.1583 7.0525

25May2002 205.69 219.62 187.85 30.3041 6.7874

01Jun2002 200.27 208.26 193.53 30.4500 6.5770

Price to Earnings

Foodland Farsi: Price to Earnings Band Chart

Max: 20.2x

Upper: 14.4x

Avg: 8.6x

Lower: 6.8x

Min: 5.0x

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Mar02 Sep02 Mar03 Sep03 Mar04 Sep04 Mar05 Sep05 Mar06 Sep06

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Interpretation of Band Charts

Currently, the Price Line (colored in BLUE) is touching the Maximum PE Band Line of 20.2x. If we trace backwards

the Maximum PE Band Line till March’02, we find the Price range at which the stock would have traded. For

example, as of March’02, the stock would have traded at Rs600/- if the PE of the stock at that point in time was

20.2x

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