Earnings and dividends are key components in assessing a company’s fundamental value. This value is reflected in the company’s P/E.

Logically, companies that have:

• low earnings stability, and/or
• pay large dividends relative to earnings, and/or
• lack dividend payout stability,

are at a greater risk of a price correction than companies that have a stable track record.

Similarly, companies with a current P/E that is at a significant premium compared to their historical P/E have either been re-rated or are experiencing a period of exuberance. Such companies are more at risk to a price correction than companies priced at historically stable P/E’s that are inline with their industry group.

Market Shares provides graphs and tables on earnings, dividends and P/E’s for your consideration of risk to the company’s fundamental value.