Often I come across the term that a particular stock, say Infosys is trading at 7.5X its 2008 PE earnings or 10.2x its FY2005 earnings .Can you please explain what they actually mean by that?
2006-10-07 14:37:18 · 3 answers · asked by karthick s 2 in Business & Finance ➔ Investing
Price Earning ratio is the price per share divided by the earnings per share. The higher the ratio, the higher the price reelative to the earnings. Bear in mind the industry the share is in is significant e.g. manufacturing compared to finance/banks is different. Some industries have higher ratios than others. If a firm has higher than average P/E even when compared to others in the same group there are usually reasons for it e.g takeover target etc. Whilst a good measure of a firms performance, there are other factors when considering a stock purchase!
2006-10-07 15:22:13 · answer #1 · answered by Tom Cat 4 · 0⤊ 0⤋
Means that the company trades at (for example) 15 times the amount of money it is likely to make in fiscal year 2007. A company's price earnings ratio (ie price divided by earnings) is the common way of keeping track of how 'expensive' a stock is-- the higher the PE the more you have to pay for a dollar of earnings. Companies with high PEs are expected to grow earnings rapidly while companies while companies with low PEs are expected to have more stable earnings.
2006-10-07 14:42:43 · answer #2 · answered by Adam J 6 · 0⤊ 1⤋
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2006-10-07 18:34:30 · answer #3 · answered by stock.trade 1 · 0⤊ 0⤋