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What is P/E ratio I was a little confused with this Explain in laymaan language and examples of practical companies if any
Answers (4)
Varshaa M
P/E ratio is Price earnings ratio. P/E ratio = MPS / EPS Also, P/E ratio = 1 / Ke It provides indication whether a stock at its current market price is expensive or cheap.
I need more clarity I wasn't understand the last 2 lines
Varshaa M
P/E ratio is Price earnings ratio. P/E ratio = MPS / EPS Also, P/E ratio = 1 / Ke It provides indication whether a stock at its current market price is expensive or cheap.
PE = 1/Ke is not appropriate though used in ICAI SM
It is one of the metrics in the stock market to find out whether the share price of a company is overvalued or not.think like this ,we buy shares based on whether the company is profitable or not.for example there are two companies both having same profit/earnings per share which is 10 but the market price of B company is 100 and another company C is 200.now as stock market analyst who don't take any risk will buy B company shares in his mind he can recover his 100 rs in 10 years through dividend which is nothing but potential earnings per share.the stock analyst who is risky or who think the C company going to earn triple in coming years so he think he will recover 100 rs less than 10 years
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