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Price Earnings ratio is a measure of market valuation (capitalization) and is a ratio between the price per share to the earnings per share. Price Earnings ratio is affected by a number of factors- the growth rate of the company, expectations of future growth rate , earnings- both retained and dividends paid out, other risk factors, economic conditions etc. Generally, young growing firms with multitude of growth opportunities tend to have a higher P/E. The market lets fast growing companies (tech) usually have a higher p/e ratio. due to the fact that the market perceives the company that is growing fast, will have increased earnings in the future. For example if a company is a trading at $1 per share, and has earnings of a dime per share. Then the company's p/e ratio is 10. As a rule anything (p/e ratio) under 20 is good and over 20 is getting expensive. Value stocks have a low p/e ratio. but maybe grow at a slower pace than a tech. firm where p/e ratio of 30 to 40 is more common.

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15y ago
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15y ago

It is easy to calculate a price to earnings ratio, simply divide the stock price by the annual earnings per share.

Earnings per share is calculated by dividing the earnings by the number of outstanding shares in the company.

P/E ratios come in two types, trailing and estimated. Trailing P/E ratios are based on the most recent earnings of the company. Estimated P/E ratios are based on the future anticipated earnings of the company. These estimates are usually forecast by financial analysts that cover the stock.

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14y ago

Price earning ratio is calculated by dividing price of a product with the earning of that product and it is used to calculate earnings against the price of a product particularly stocks, bonds, futures etc. to calculate the profitability of a share in stocks.

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Q: What is the price to earnings ratio?
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Related questions

What is an example of a market prospects ratio?

Price earnings ratio.


What affect does earnings per share have on price earnings ratio?

the price earnings ratio is simply earnings-per-share divided by the share price. OOPS! I got that upside down! It is the share price divided by the earnings per share. The earnings figure might be for the trailing twelve months (ttm) or earnings estimated for the next four quarters.


What is the pe ratio of a business?

Is the Price/Earnings ratio. You can find it by taking the market price per share and dividing it by the annual earnings per share.


What is the price-earning?

If you mean the price-earnings ratio. It is the price per share of a common stock divided by the annual earnings of the stock.


What is the Price and Earnings ratio when a company has an Earnings Per Share of 2.00 and a cash flow per share of 3.00 and a price and cash flow ratio of 8.0?

A company has an EPS of $2.00 Cash flow per share of $3.00 Price/cash flow ratio of 8.0x What is its P/E ratio? Price Per Earnings Ratio = Market Value Per Share / Earnings Per Share (EPS) 8.0 x 3.00 = 24 24/2 P/E = 12X


What factors might influence a firm's price-earnings ratio?

The price earnings ratio is influenced by: -the earnings and sales growth of the firms -risk -debt-equity structure of the firm -dividend policy -quality of management -a number of other factors


A firm with earnings per share of 5 and a price-earnings ratio of 15 will have a stock price of?

Just use 5 times 15. $75.


What are some financial variables that affect the price earnings ratio?

interest rate


What is the typical Price to Earnings ratio for a service business?

about five to six times EBIT


What is the current FTSE price earnings ratio?

http://www.ftse.com/Indices/UK_Indices/Values.jsp


What are the 3 factors that determine a company's price-earnings ratio?

the accounting method used


How can one figure out the PE ratio for a company?

The Price/Earnings ration (PE ratio) is the price of stock divided by the past or future earnings. For example, if the price of Dell is $100 and the company earned $10 per share over the past 12 months, then the trailing 12 month ratio would $100/10, or 10.