Justified P/E

P/E based on fundamentals -> Justified P/E : 다른 주식 P/E랑 비교하지 않고 자기 value를 위해 사용!

P0 = D1 / k-g (k= cost of equity --> Required Rate of Return: r)

Justified P/E ==> P0 / E1 = D1 / (k-g) *E1 = (D1/E1) / (k-g) = Payout Ratio / (k-g)

E1 = projected earnings (EPS)

When payout ratio increases, the justified P/E multiple increases only if we assume that the growth rate will not change as a result.