More ups and downs
Don't make the mistake of believing that share valuations are based on the quoted share price. There is a simple calculation that measures the company's worth. It is known as the price to earnings ratio, or P/E.
Take the example of the supermarket group William Morrison. Its P/E is quoted as 14 in the Financial Times. It means the group is valued at 14 times last year's earnings.
Meanwhile, its rival Tesco has a P/E of 23 - or 23 times last year's earnings. So what do we learn from this?
Well put simply, the market values Tesco's shares more highly than Morrison's.
That's hardly surprising. Tesco has a track record of delivering bumper profits, while Morrison has endured a series of profit warnings.
P/Es vary from sector to sector. Growth industries such as technology will have a higher average P/E's than stable sedentary arenas such as the grocery market.