Ovintiv (TSE:OVV) shareholders are no doubt pleased to see that the share price has bounced 88% in the last month alone, although it is still down 54% over the last quarter. However, that doesn’t change the fact that longer term shareholders might have been mercilessly wrecked by the 77% share price decline throughout the year.
All else being equal, a sharp share price increase should make a stock less attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. So some would prefer to hold off buying when there is a lot of optimism towards a stock. Perhaps the simplest way to get a read on investors’ expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). A high P/E