New CSE method to calculate price multiples

The Colombo Stock Exchange (CSE) said in a statement that a revision in the method of calculating Price Multiples (P/E, P/BV and DY) has been effected.

The Price-Earnings Ratio (P/E Ratio) and Dividend Yield Ratio (DY) will be calculated taking into consideration 'Rolling Four Quarterly Earnings' instead of the current practice of sourcing earnings from the annual results of listed companies.

The Price to Book Value Ratio (P/BV) will now be calculated based on the latest quarterly results instead of the annual results of listed companies. The change was implemented from May 3.

Reporting dates in terms of year-end may vary based on the company and could, therefore, mean that ratios such as P/E, P/BV and DY that are based on annual data could go out-of-date.

Head of Research and New Products at CSE Nishantha Hewavithana said, "The revised method would help portray the current earnings' trend in a timely and effective manner by taking into consideration the latest financials of the company. With this revision, the multiples will offer a realistic reflection to users of this information, which would facilitate better decision-making"

The use of quarterly statistics is a globally accepted methodology that is practised by exchanges around the world and puts all listed companies on a comparable footing, which facilitates a fair and timely comparison.