P/E ratio
- relates a company's share price to its earnings per share
- known as the price multiple
- used to compare a company against its own historical record
- Companies that have no earnings or that are losing money do not have a P/E ratio
- since there is nothing to put in the denominator
- Analysts and investors review a company's P/E ratio when they determine if the share price accurately represents the projected earnings per share.
- Formula
- P/E ratio = market value per share / earnings per share
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