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Trading and Investment Terms

Price to Earnings Ratio – P/E

We use the price to earnings or the p/e ratio in order to estimate the value of a company. Price to earnings ratio is calculated by dividing Market Price of a stock by its earnings per share or EPS.

 

P/E proportions are utilized by financial specialists to decide the overall estimation of a company’s security in consistent correlation with other secutities.

 

It can likewise be utilized to compare a company against its own previous records. Indices can also be compared against one another or over a period o time.

 

Analysts and investors audit a company's P/E ratio when they decide whether the offer price accurately represents the reported earnings per share. Use the formula below to calculate P/E:

 

P/E Ratio = Market value per share / Earnings per share

 

To decide the value of the P/E ratio, you should simply divide the current stock price by the company’s earnings per share.

 

EPS is available in two fundamental assortments:

 

On some sites you can find it under the label P/E (TTM), where TTM stands for trailing twelve months meaning it shows the company’s performance in the past 12 months.

 

Or you can find EPS listed in the earnings reports released by the company.

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