Is there a relatioship between PE ratio of a share/stock and its intrinsic value?

Answer 1

no

P/E is price/earnings, and is a function of market forces having virtually nothing to do with the actual value of tangible assets, efficiency of production, etc.;

moreover, P/E is not correlated to the number of shares either authorized or outstanding; per-share intrinsic value is ordinarily negligible, and the aggregate monetary value of share intrinsic values is typically only an exceedingly miniscule fraction of wholly-owned capital

there's a pretty decent explanation available on Wikipedia at http://en.wikipedia.org/wiki/PE_ratio

Answer 2

The answer is both yes and no. Or perhaps maybe. I somewhat agree with what the previous responders have stated, but it is more complicated than that. Market forces do have an impact on the PE ratio of a company. But also the expected discount value of it future earnings. To me that is the intrinsic value of a company.

Some companies indeed are undervalued by the market and other companies are overvalued by the market at any given time but over a period of time the value of a company will tend to normalize around its intrinsic value.

Answer 3

None at all. The share price can be anything at all - even sometimes lower than its intrinsic value. The PE reflects how highly the market values the company's growth prospects.

Answer 4

There is no relationship between PE multiple and interinsic value.PE module is used for determining market price by multiplyingEPS.of company.By comparing it with we are in posion to know whether stock overpriced or not