Why you should not rely on price/earnings values

TECHNICAL

Elizabeth Davis, quantitative analyst on the Rathbone Income team, explains the pitfalls investors often face when interpreting statistics.

Investors are bombarded daily with statistics. They scare us into doing things, and excuse things that have already happened, but can we ever take them at face value? The problem lies not with the stats per se but at the feet of those who wield them. That is not to say we are being mislead, but there are myriad traps that one can fall into. Indeed, one might question how we can justify using stats at all? Well, they remain a powerful tool, and when used properly, they provide a vast fountain of information. The question is how do we avoid the traps?   ‘Rubbish in, rubbish out’ Th...