Calculate Price to Earnings Ratio
Calculate Price to Earnings Ratio | Definition
The price-to-earnings ratio of a stock. A stock's current market price divided by its current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. A projected P/E divides the share price by estimated earnings per share for the coming 12 months.For example, assume that XYZ stock sells for $25.50 per share and has earned $2.55 per share this year. Since the share price of $25.50 is 10 times XYZ's earnings per share of $2.55, XYZ stock sells for 10 times earnings.
A higher P/E "multiple" means that investors have higher expectations for future growth of the company and have bid up the stock's price. The P/E ratio is a measure of the attractiveness of a particular security as determined by the investing public.
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