PE ratio—also known as P/E ratio, P to E ratio, or simply PE.
PE ratio has become one of the most talked about measures of valuation—if a stock is fairly valued, undervalued, or overvalued.
This week, we will learn more about this ratio, what it tells us, and what it cannot tell us.
First, how is it calculated?
Price of one stock divided by the earnings-per-share of that company.
PE ratio = Current share price / earnings-per-share.
Earnings-per-share = net profit of a company / total shares.
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