Definition

The Median Price to Earnings (PE) Ratio Without NRI is a financial metric used to evaluate the valuation of a company's stock by comparing its current share price to its earnings per share (EPS), excluding any non-recurring items (NRI) that may distort the earnings figure.

Formula

Median PE Ratio Without NRI = Median (Share Price / EPS Without NRI)

How to use the valuation method

To use this valuation method, calculate the PE ratio for a set of companies or for a single company over a period, excluding any non-recurring items from the earnings. Then, determine the median of these PE ratios to assess whether a stock is overvalued or undervalued compared to its historical performance or industry peers.

Which industries it work best in

The Median PE Ratio Without NRI works best in industries with stable earnings and fewer non-recurring items, such as consumer staples and utilities, where earnings are more predictable and less volatile.

Which industries it does not apply to and why

This metric may not apply well to industries with highly volatile earnings or frequent non-recurring items, such as technology or biotech, where earnings can be significantly impacted by one-time events, making it difficult to assess true valuation.

Summary

The Median PE Ratio Without NRI is a useful tool for evaluating stock valuation by focusing on core earnings, excluding non-recurring items. It is most effective in stable industries and less applicable in sectors with volatile earnings due to frequent non-recurring events.