What is the pe ratio in share market?

Question

What is the pe ratio in share market?

Answer 1

the amount which the company is earning against equity per year

regards

Answer 2

it is the Price to Earnings ratio of which it measures how many multiples the stock is trading at (its market price) compared to its earnings. To compute it, you have to use the

(Current Market) Price / EPS formula.

Therefore you would have to compute EPS first off.

EPS is given by the

Net Profit (after interest and tax) attributable to shareholders / Weighted Number of Shares.

(these information can be found from the income statement and balance sheet respectively)

Once you have found EPS, you can carry on with calculating the PE ratio.

To do a comparison based on PE ratio on the viability of purchasing a stock, investors compare the individual stock's PE ratio with the market's and of other stocks'.

For example,

PER for MBB is 14.2 multiples

PER for IOI is 31.5 multiples

PER for the (market) KLCI is 15 multiples

The analysis would be, MBB is relatively cheaper to purchase compared to the market because it has a lower PE. It also applies to IOI of which it is trading at 31.5 times its earnings. MBB is also relatively 2 times cheaper than IOI.

Answer 3

Its Price Earning (p/e) ratio......

PE ratio of a company shows its premium value in the market.......

Good and best companies have high P/E.

Suppose if a company P/E is 4 then its assumed that if that company continue to operate its operations and continues to get a similar profit/loss during the whole 4 year period only then ur invested amount in that company comes at par...

Its simple,again

suppose u have 2 frnd....1 u know from a long time and u can blindly rely upon and the second u dont know much about or u r not that much reliable on second friend....

and one day,both the friends ask u for Rs.10 and assuming their credilibility u allows 1st friend 2 pay that amt 2 u within 4-5 years which means 4-5 P/E, whereas, u asks ur second friend to pay that amount within 1year that means the second friend have 1 p/e, and so on...........

GOT..............So, P/E shows the credilibity of a company....

Answer 4

PE stands for Physical Eduction

Answer 5

The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular stock analysis ratio, although it is not the only one you should consider.

You calculate the P/E by taking the share price and dividing it by the company’s EPS (Earnings Per Share that we saw above)

P/E = Stock Price / EPS

For example: A company with a share price of Rs.40 and an EPS of 8 would have a P/E of: (40 / 8) = 5

What does P/E tell you?

Some investors read a high P/E as an “overpriced stock”.

However, it can also indicate the market has high hopes for this stock’s future and has bid up the price.

Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean that the market has just overlooked the stock. Many investors made their fortunes spotting these overlooked but fundamentally strong stocks before the rest of the market discovered their true worth.

In conclusion, the P/E tells you what the market thinks of a stock. It tells you whether the market likes or dislikes the stock.

PEG (Price to future growth ratio!) and what it tells you!

The market is usually more concerned about the future than the present, it is always looking for some way to figure out what is going to happen in the companies future.

A ratio that will help you look at future earnings growth is called the PEG ratio.

You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG = (P/E) / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next year of 15% would have a PEG of 30 / 15 = 2.

What does the “2” mean?

Technically speaking: The lower the PEG number, the less you pay for each unit of future earnings growth. So even a stock with a high P/E, but high projected earning growth may be a good value.

So, to put it very simply, we are interested in stocks with a low PEG value.

Just for the sake of understanding, consider this situation, you have a stock with a low P/E. Since the stock is has a low P/E, you start do wonder why the stock has a low P/E. Is it that the stock market does not like the stock? Or is it that the stock market has overlooked a stock that is actually fundamentally very strong and of good value?

To figure this out, you look at the PEG ratio. Now, if the PEG ratio is big (or close to the P/E ratio), you can understand that this is probably because the “projected growth earnings” are low. This is the kind of stock that the stock market thinks is of not much value.

On the other hand, if the PEG ratio is small (or very small as compared to the P/E ratio, then you know that it is a valuable stock) you know that the projected earnings must be high. You know that this is the kind of fundamentally strong stock that the market has overlooked for some reason.

Important note: You must understand that the PEG ratio relies on the projected % earnings. These earnings are not always accurate and so the PEG ratio is not always accurate.