Investment Term for the Day : Price to Earning Ratio
Sign up for free
Listen to this episode and many more. Enjoy the best podcasts on Spreaker!
Download and listen anywhere
Download your favorite episodes and enjoy them, wherever you are! Sign up or log in now to access offline listening.
Description
The price-to-earnings ratio is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The price-to-earnings ratio is also sometimes known as the...
show moreP/E ratios are used by investors and analysts to determine the relative value of a company's shares in an apples-to-apples comparison. It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time.
Analysts and investors review a company's P/E ratio when they determine if the share price accurately represents the projected earnings per share. The formula and calculation used for this process follow.
A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. A low P/E can indicate either that a company may currently be undervalued or that the company is doing exceptionally well relative to its past trends. When a company has no earnings or is posting losses, in both cases P/E will be expressed as N/A. Though it is possible to calculate a negative P/E, this is not the common convention.
Information
Author | Africa Business Radio |
Organization | Africa Business Radio |
Website | - |
Tags |
Copyright 2024 - Spreaker Inc. an iHeartMedia Company