2006-06-07 08:02:02 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
PRICE / EARNINGS ratio as in:
Price of company A's stock = 3.00 per share
Earnings of the company per share of stock = 1.50 per share
PE ratio = 3.00 / 1.50 = 2.00
This among other valuable information indicates the value of the investment and the change in the P/E from period to period is an indicator of the direction of the company
2006-06-07 08:19:00 · answer #1 · answered by RunningUte 3 · 1⤊ 0⤋
In addition PE ratio indicates the growth prospects for a company. A company with a PE ratio of 2 is essentially saying that investors are willing to pay $2 now for every $1 in current earnings. This would be a very low PE ratio. A company with very high growth expectations, such as Google, might have a PE ratio of 75 which indicates investors are willing to pay $75 now for every $1 in current earnings.
2006-06-07 09:56:16 · answer #2 · answered by Brian N 2 · 0⤊ 0⤋
For the relevance (or not) of PE ratio, read the book "Common Stocks and Uncommon Profits", by Philip Fisher, chapters 4 - 6 under "Conservative Investors Sleep Well"
2006-06-07 14:22:17 · answer #3 · answered by andrew f 3 · 0⤊ 0⤋
yep guys right
2006-06-07 09:53:53 · answer #4 · answered by reallyno 3 · 0⤊ 0⤋
Indeed sir...
2006-06-07 09:48:38 · answer #5 · answered by joranel 2 · 0⤊ 0⤋